ALTERA CORP, 10-K405, 1995-03-30

ALTERA CORP
10-K405, 1995-03-30
SEMICONDUCTORS & RELATED DEVICES

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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM 10-K

(MARK ONE)

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (FEE REQUIRED)

FOR THE FISCAL YEAR ENDED DECEMBER 31, 1994

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)

COMMISSION FILE NUMBER 0-16617

ALTERA CORPORATION
(Exact name of registrant as specified in its charter)

CALIFORNIA 77-0016691
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)

2610 ORCHARD PARKWAY, SAN JOSE, CALIFORNIA 95134
(Address of principal executive offices) (Zip Code)

Registrant's telephone number, including area code: (408) 894-7000

Securities registered pursuant to Section 12(b) of the Act:
NONE

Securities registered pursuant to Section 12(g) of the Act:
COMMON STOCK
(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes X No
-------- --------.

Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K (Section 229.405 of this chapter) is not contained
herein, and will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference in Part III
of this Form 10-K or any amendment to this Form 10-K. [X]

The aggregate market value of the registrant's Common Stock held by
non-affiliates of the registrant was approximately $1,180,770,557 as of
February 28, 1995, based upon the closing sale price on Nasdaq for that date.

There were 21,591,475 shares of the Registrant's Common Stock issued
and outstanding as of February 28, 1995.

DOCUMENTS INCORPORATED BY REFERENCE

Items 5, 6, 7, and 8 of Part II incorporate information by reference
from the Annual Report to Shareholders for the fiscal year ended
December 31, 1994.

Items 11, 12, and 13 of Part III incorporate information by reference
from the 1995 Proxy Statement for the Annual Meeting of Shareholders to be held
on April 26, 1995.

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PART I

ITEM 1. BUSINESS.

GENERAL

Altera Corporation (the "Company" or "Altera") designs, develops, and
markets CMOS (complementary-metal-oxide-semiconductor) programmable logic
integrated circuits and associated computer-aided engineering development
software and hardware. The Company's semiconductor products, which are generally
known as CPLDs (Complex Programmable Logic Devices), are standard logic chips
that customers configure for specific end-use applications using the Company's
proprietary software. The Company's customers enjoy the benefits of low
development costs, short lead times, and standard product inventories when
compared to Application Specific Integrated Circuits ("ASICs").

Altera Corporation was incorporated in January 1984 in California.

BACKGROUND

The CMOS programmable logic market has developed as a result of two primary
factors: (i) the need for more logic functions on each integrated circuit in
order to achieve the performance and cost objectives of electronic systems
manufacturers; and (ii) shortened product life cycles for end products which put
an increased premium on time to market for the system manufacturer.

Historically, electronic system manufacturers have used low-density
standard TTL integrated circuits as basic building blocks for the logic
functions that control their systems. The desire of these manufacturers for
further differentiation and improvement of their products, however, has
generated demand for higher density logic circuits. Higher density (and thus
more "integrated") circuits, which have more logic functions on each chip, allow
the electronic equipment manufacturer to make improvements to the end product
that reduce physical size, reduce cost, improve performance, reduce power
consumption, and add features for further differentiation. However, the need for
increased integration and greater product differentiation makes it difficult for
electronic system manufacturers to use standard, mass-produced (low cost) logic
circuits.

In the 1980's, ASICs gained popularity as a solution to the integration
problems noted above. ASICs include a variety of custom and semi-custom
alternatives, such as gate arrays, cell libraries, and silicon compilers. Using
computer-aided engineering ("CAE") software tools, ASIC designers are able to
combine sections of standard logic and generate unique tooling, which can then
be used to fabricate a unique custom chip in the manufacturing process. Although
ASICs achieve the goal of higher density and more integration by combining a
variety of low-density parts into a single chip, they do so by introducing
several compromises, resulting from the customized manufacturing process, that
are undesirable to many users of standard low-density chips. These compromises
can include longer lead time to the marketplace, Non-Recurring Engineering
("NRE") fees, dedicated custom product inventory, lack of control over sources
of supply, and inflexibility of design iteration.

Another alternative, historically, has been the bipolar Programmable Logic
Device ("PLD"), introduced in the late 1970s. Bipolar PLDs are standard products
which are sold by the vendor as blank circuits. By blowing fuses on the chip,
the user customizes it to a specific logic application. This alternative
addresses some of the compromises required by ASICs, eliminating the up-front
design fees, production leadtime, and custom inventory. Bipolar PLDs, however,
have been limited to relatively low densities (under 500 gates) due to the
significant power consumption and heat dissipation inherent in bipolar
technology.

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BUSINESS STRATEGY

First introduced by Altera in 1984, CMOS programmable logic products and
the related CAE development software have emerged as a significant market. The
use of low power CMOS technology, in contrast to bipolar technology, permits
higher chip densities and allows system designers to use programmable logic
chips to address applications that had previously required ASICs. CMOS
programmable logic products are currently offered to the market by semiconductor
vendors in various architectures, using EPROM (erasable-programmable-read-only-
memory), EEPROM (electrically-erasable-programmable-read-only-memory), SRAM
(static random access memory), FLASH (non-volatile memory), and anti-fuse
configuration storage elements. The major elements of Altera's strategy include:

Standard Components. The Company's CMOS programmable logic chips are
manufactured as standard products (i.e., shipped "blank" for programming by
the user). The chips use CMOS technology for low power and use an erasable
configuration element: EPROM, EEPROM, SRAM or FLASH. This combination
allows Altera's CPLDs to shorten the design cycle which is characteristic
of ASIC custom chips, by permitting multiple design iterations without the
need to have prototype custom designs fabricated in silicon, redesigned,
and refabricated. The end user benefits because Altera's programmable chips
are configured at the desktop rather than in the foundry, by means of
Altera's proprietary development software, dramatically shortening the time
to market. Since Altera's integrated circuits are standard products and
have a wide range of uses, inventory risks are minimized for customers,
distributors, and the Company. Altera also benefits from economies of scale
in the manufacturing process by minimizing logistics, inventory, and
overhead costs.

Proprietary Product Architecture. The Company holds patents on various
aspects of its chip architectures which combine speed and density with the
benefits of user programmability. The Altera CPLD architectures make
certain performance paths in the integrated circuits easier to predict and
simplify the task of designing with programmable logic chips.

Software Development Tools. Altera has dedicated a significant portion
of its research and development staff to the development of its proprietary
software. This software permits designers to use their desktop personal
computers or workstations to develop and program Altera chips to function
as custom logic devices quickly and under their own control. The Company's
strategy has been to offer its development software systems at relatively
modest prices (beginning at under $5,000) in order to achieve an installed
base of design sites that may generate future chip orders.

Broad Product Line. The Company's strategy is to apply its basic
technology to a broad general purpose product line spanning a range of
densities, pin counts, and speeds. Products currently in production range
in density from an estimated 150 to 16,000 usable gates, and the Company
has announced its plans for even higher density products in the future. The
Company also has a multi-chip module which provides on the order of 50,000
usable gates for certain applications.

Diversified Markets. The Company has sold its semiconductor components
to a broad base of customers worldwide in a range of market segments,
including telecommunications, computer, industrial, consumer, and
military/aerospace.

Technology and Production Relationships. Altera has obtained its CMOS
silicon chips through supply arrangements with leading semiconductor
manufacturers. The Company has avoided the full capital commitment and
overhead burden of establishing its own wafer fabrication facility, and has
the flexibility to utilize new process technologies as they become
available.

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Intel PLD Division Acquisition. On October 1, 1994, the Company
purchased the programmable logic device ("PLD") division of Intel
Corporation ("Intel"), including associated capital equipment, inventory,
and certain intellectual property. The Company paid Intel $22.5 million in
cash and issued Intel 701,350 shares of Common Stock as consideration for
the purchase. The Intel PLD product line consists of approximately 15
devices, which the Company incorporated into its product line. The Company
is incorporating the acquired capital equipment into its manufacturing
process. As part of the acquisition, Intel agreed to supply the Company
with up to certain specified amounts of associated PLD wafers for three
years and to license the Company to make PLDs under certain Intel patents,
and the Company agreed to supply Intel for the same three-year period with
the finished PLDs Intel had previously manufactured. In addition, the
Company agreed to license back to Intel on a limited basis certain acquired
intellectual property which the Company purchased.

TECHNOLOGY

Altera's chips incorporate several types of internal architectures which,
combined with advanced CMOS semiconductor technology, provide speed and logic
density for the customer. The Company holds a number of patents on various parts
of its chip architectures. Altera's chips are configured by the Company's
proprietary development software that translates an engineer's logic schematics
and hardware descriptions into logic functions on an Altera chip.

Altera Logic Chips

Architectures. Altera believes its architectures offer high performance
across a broad range of user applications. At the same time they provide
simplicity to the system logic designer, making the task of designing and using
Altera's chips relatively easy.

The architectures used in the Company's Classic, MAX 5000, MAX 7000,
FLASHlogic, and MAX 9000 families are known as array-based architectures. These
architectures are very regular, comprised of elements called Macrocells, and are
optimized for combinatorial logic. The FLEX architecture is optimized for
register-intensive logic applications. The FLEX architecture consists of fine
grained logic elements grouped into higher level logic array blocks which are
then connected together with a proprietary programmable interconnect structure.
The FLASHlogic family uses non-volatile FLASH memory cells that can be
configured as on-board memory or logic.

Process Technology. Through technology relationships, Altera has gained
access to CMOS process technologies from larger semiconductor manufacturers. The
Company's first generation CPLD product line (known as the "Classic" family) is
manufactured using processes with 1.0 and 0.8 micron effective channel lengths.
MAX, FLEX, and FLASHlogic products are being produced using processes with
effective channel lengths of 0.8 and 0.6 microns and are expected to use more
advanced CMOS processes when available. The Company procures wafers from various
semiconductor manufacturers including Cypress Semiconductor Corporation
("Cypress Semiconductor"), Sharp Corporation of Japan ("Sharp"), and Taiwan
Semiconductor Manufacturing Corporation ("TSMC").

Compared to bipolar technology, CMOS provides lower power dissipation and a
cooler operating temperature. These attributes have allowed Altera to design and
manufacture its higher density programmable logic chips. Unlike bipolar or
antifuse devices, which are nonerasable, Altera's programmable chips use EPROM,
EEPROM, SRAM, and FLASH programming mechanisms, which make the chips erasable
and reconfigurable.

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EPROM configuration elements require ultraviolet light for erasure,
necessitating relatively expensive quartz-windowed packages. Devices in
quartz-windowed packages are primarily used by customers for prototyping and
low-volume production. Altera has mitigated this package cost to users by also
making its parts available in plastic one-time programmable packages to permit
reduced costs for volume production. (One-time programmable means that the parts
can only be programmed once and are not erasable once programmed.) In 1992,
Altera began offering chips incorporating EEPROM (MAX 7000) and SRAM (FLEX)
configuration elements. The EEPROM ("E2") element permits electrical erasure so
that erasure can occur even when packaged in plastic packages, providing further
flexibility and cost advantage for customers. The SRAM element provides low
stand-by power consumption and in-circuit reconfigurability, as well as erasure
in plastic packages. FLASH memory elements, used in certain chips acquired in
conjunction with the purchase of Intel Corporation's Programmable Logic Device
Division on October 1, 1994, also offer these features.

The Company routinely evaluates existing and emerging types of programmable
elements. If Altera perceives that such programming methods provide benefits
that complement those of its current products, it will consider incorporating
them into its products.

Development System Software

The Company's development system software and hardware is used to implement
logic designs in its chips. Altera's MAX+PLUS II software system contains
approximately two million lines of source code. The MAX+PLUS II software runs
under Microsoft's Windows operating environment on personal computers and in the
Motif environment on Unix workstations. By utilizing these popular graphical
user interfaces, the Company has designed the software for portability to widely
used personal computers and engineering workstations.

The Company provides interfaces to many industry standard third party CAE
tools via the industry standard EDIF netlist format and hardware description
languages (Verilog and VHDL, for example). These connections allow the Altera
software to be used in conjunction with software packages including those
offered by Cadence Design Systems, Inc., Data I/O Corporation, Exemplar Logic,
Inc., Intergraph Corporation, Mentor Graphics Corporation, OrCAD Systems
Corporation, Synopsys, Inc., and Viewlogic Systems, Inc.

An Altera chip design for a particular end product application is achieved
in four steps: design entry, implementation, verification, and programming. The
Company's development software provides complete facilities for each step so
that the customer can take advantage of a uniform and relatively easy to learn
design environment. Extensive on-line help is available in the software to
provide relevant information quickly.

Design entry is accomplished using either the proprietary integrated
editors or third party tools. Three basic entry formats are accepted: schematic,
where the logic is represented pictorially; hardware description language, where
textual logic equations define the circuit; and waveform design entry, where a
designer specifies only the input and output waveforms of a circuit. A
combination of the three methods may be used hierarchically in a design.

Implementation of the design is performed by Altera's proprietary logic
synthesis, partitioning, and fitting software. This software takes a design and
uses sophisticated mathematical routines to optimize and compact the user's
logic, partition the logic among several chips (if necessary), and then fit each
partitioned section into one of these chips. Typically this process requires
minimal intervention from the user.

Design verification lets a user confirm the logic correctness of a design
by using several proprietary tools in addition to third party simulators. The
Company's static timing analyzer allows analysis of the timing of critical logic
paths; integrated functional simulation allows rapid functional

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logic debugging; and timing simulation allows the validation of full circuit
operation. Simulation results may be viewed using the Company's waveform editor.

The final step, programming, may be performed using the Company's
programming hardware and integrated software, or third party programmers such as
those from Data I/O Corporation. During this step, the optimized logic design is
programmed into a CPLD (or serial EPROM in the case of the FLEX SRAM-based logic
chips) which is then ready for use on a circuit board in an electronic system
product.

PRODUCTS

Altera sells a range of CMOS programmable logic integrated circuits and
associated development software and hardware. The integrated circuits include
products aimed at general logic replacement as an alternative to ASICs and
products targeted at specific functions. The Company's development software
allows the user to take advantage of the features of Altera integrated circuits.
The Company's strategy has been to provide support for users of its newest
integrated circuits from the date of product introduction by developing its
software tools in tandem with the related components. Altera currently markets
seven families of CMOS programmable logic in over 500 package/chip combinations.

Integrated Circuits

Classic. This is the initial family of integrated circuits introduced to
the market by Altera in 1984 and 1985. It originally consisted of four
general-purpose CPLD integrated circuits, targeted for the replacement of
multiple small scale integrated circuits. The product family was expanded in
1994 with the acquisition of Intel's PLD division and now includes nine
different circuits. This architecture provides densities ranging from 150 to 900
usable logic gates in packages ranging from 20 to 68 pins. Wafers for this
family of products were initially provided by Intel and were subsequently
migrated to more advanced CMOS process technologies to provide faster speed and
reduced cost. Prior to the acquisition of Intel's PLD division, wafers for most
of these products were manufactured for the Company by Sharp, however as a
result of separate agreements related to the PLD division purchase, Intel has
re-emerged as a major supplier of wafers for this family. All of these products
use EPROM configuration elements. The products generally incorporate the first
generation architecture and are currently marketed and sold to customers as the
"Classic" family of products.

MAX 5000. This family of CPLDs uses a second generation architecture known
as Multiple Array MatriX (MAX) to provide higher densities than products in the
Classic family. The MAX architecture provides multiple array logic. Signals in
the higher-density devices are routed between multiple arrays by the
Programmable Interconnect Array that delivers a high percentage of routability.
This multiple array architecture enables MAX 5000 CPLDs to offer the speed of
smaller arrays with the integration density of larger arrays - MAX 5000 offers
up to 3,750 usable gates. Wafers for MAX 5000 products use EPROM configuration
elements and are manufactured by Cypress Semiconductor currently on its 0.8
micron CMOS process technology, though 0.65 micron CMOS process versions are
being developed. These products are available in packages ranging from 24 to 100
pins.

MAX 7000. This third family of CPLDs incorporates an enhanced MAX
architecture. The MAX 7000 family provides higher integration densities with
faster performance and higher pin count than the MAX 5000 family. Current MAX
7000 products offer a range of densities from approximately 600 to 5000 usable
gates, in packages ranging from 44 to 208 pins. The Company is currently
sourcing wafers for this family from Sharp. The Company began initial shipments
of the first products and related software in December 1991. This family
incorporates EEPROM configuration elements on all of its chips.

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FLEX 8000. The FLEX 8000 family was introduced in 1992 using 0.8 micron
CMOS technology from Sharp, and using SRAM configuration elements which provide
in-system reconfigurability, and low standby power. In 1994, the family was
migrated to a 0.6 micron technology at TSMC providing lower costs and higher
performance. The FLEX 8000 architecture provides relatively high register count
compared to the Classic and MAX architectures. This family provides the largest
capacity single chip the Company currently offers with approximately 16,000
usable gates and 1,500 registers in a 304 pin package.

MAX 9000. This further enhanced MAX family is one of the Company's newest
architectures and was announced in September of 1994. MAX 9000 is a
feature-rich, high-density macrocell architecture with up to 560 macrocells
(12,000 usable gates). The EEPROM-based devices are PCI-compliant and offer
non-volatile, five volt, in-system programmability (ISP). ISP functionality
allows these devices to be programmed after being soldered onto the circuit
board for manufacturing ease. Devices are offered in packages ranging from 84 to
304 pins and have in system clock speeds of up to 100 MHz.

FLEX 10K. The Company recently announced its newest family in March of
1995. The FLEX 10K architecture features an embedded array which can more
efficiently implement a variety of memory and specialized logic functions. This
family includes the Company's largest devices, which will be capable of
addressing designs as large as 100,000 gates. As with each new product family,
commercial success will require achievement of targeted yield, product cost, and
performance levels, and the development of manufacturing, marketing, and support
capabilities. Even if such goals are accomplished, there can be no assurance
that new product families will achieve significant market acceptance.

FLASHlogic. This family was acquired through the Company's purchase of the
PLD division of Intel. This high-speed, medium-density family combines volatile
SRAM elements and non-volatile FLASH memory elements to create one of the most
feature-rich families in the PLD industry. Features include on-board RAM, ISP,
and in-circuit reconfigurability. Devices are offered in usable gate counts from
800 to 3,200, with up to 208 pin packages, and in-system clock speeds of up to
100 MHz.

Function-Specific. In contrast to the Company's general-purpose CPLDs,
which are designed for maximum flexibility, these products dedicate a portion of
the circuit to predetermined functions. These Function-Specific devices trade
architectural generality for more structured organization, thus providing
increased functional density and higher performance, while still providing the
benefit of user configurability. Presently, two products are being sold in the
marketplace: a microsequencer chip and a synchronous timing generator chip for
imaging applications. Both of these products use EPROM configuration elements.
The Company intends to develop other Function-Specific products as it sees
appropriate market opportunities.

Multi-Chip Module. This programmable logic product uses multi-chip module
technology to provide customers with approximately 50,000 usable gates in one
product. Four chips from the Company's FLEX 8000 family are combined in a
multi-chip module along with an SRAM-based field programmable interconnect chip
(supplied by a third party). The resulting product, offered in a 560-pin PGA
package, addresses the need for ASIC prototyping at much higher density levels
than currently offered by the Company's single-chip products.

The Company offers a variety of plastic and quartz-windowed ceramic
packages for its chips, including dual-in-line, surface mount, ball-grid, and
pin-grid array configurations. Altera provides components to meet the operating
temperature ranges of commercial, industrial, and military users. The Company
also offers a conversion option to its customers on a number of its chips, that
converts the programmable chip to a non-programmable gate array format. This
option is called a Mask Programmable Logic Device (MPLD). By hard coding the
programming into the chip with a mask (as with a gate array), Altera is able to
provide the customer a lower cost end solution after prototyping with
programmable chips.

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Development System Software and Hardware

A cornerstone of Altera's strategy is the market penetration of its
low-cost proprietary software design tools. These tools improve the productivity
of Altera's customers, and the Company, in turn, develops a base of customers
who use Altera's software to design their products. Each development software
package can be used repeatedly for different designs on an ongoing basis. A
number of these designs may become incorporated into long-term customer
products, which generate expanded logic chip sales.

Altera's software works only with Altera-designed logic chips, thus
providing a competitive advantage for Altera when dealing with customers that
use its development system. As of the end of 1994, Altera had licensed over
19,000 of its development system software packages, although at any given time
only a portion of these may be active.

The Company attempts to work closely with its installed base of customers,
tracking the progress of logic chip designs, providing applications design
support, and for those customers who have purchased maintenance agreements,
upgrading the customers' software. Management believes that close contact with
its development software customers is a key element in customer satisfaction and
can also provide insight into new product development areas.

Altera's development software runs under the Microsoft Windows operating
system. The compiler software has also been ported and is available for
engineering workstations, including Sun, DEC, IBM, and Hewlett-Packard
workstation platforms. The software, in general, is typically delivered to the
customer on CD ROM or on multiple diskettes, along with documentation manuals.
The hardware consists of a programming board which plugs into an expansion slot
of the user's personal computer, and a programming unit which uses hardware that
accepts various chip package types. High-volume production programming equipment
is available from Data I/O Corporation and other companies.

Altera's development software products aid the chip user's design
efficiency by allowing the user to continue with proven, familiar methods rather
than learn new ones. Accordingly, the most widely-used design methodologies are
supported, including Boolean algebra for low-density PLD users, as well as
schematic capture and hardware description languages for TTL and ASIC users.

The output from any of these design methodologies is translated into a
consistent format for implementation into an Altera chip, and the design is
fitted by Altera's proprietary software into the particular chip chosen. This
approach frees the system design engineer from the unfamiliar task of chip
design and allows the engineer to focus on logic implementation.

MANUFACTURING

The Company does not directly manufacture its silicon wafers. Its products,
however, require wafers manufactured with relatively state-of-the-art
fabrication techniques. The Company's strategy, therefore, has been to maintain
relationships with larger semiconductor manufacturers for production of its
wafers. The Company believes that these manufacturers can produce wafers at
lower cost due to their advanced production facilities and manufacturing
economies of scale. Altera's chips are produced using each manufacturer's
high-volume wafer fabrication processes, thus enabling the Company to take
advantage of economies of scale and process advances.

Altera presently has its primary wafer supply arrangements with five
semiconductor vendors: Sharp, TSMC, Intel Corporation, Cypress Semiconductor,
and Texas Instruments. See "Patents and Licenses" for a summary of these
arrangements. Assuming timely delivery and no significant yield problems, the
Company believes that wafer purchases pursuant to its current supply agreements
will be adequate to meet its present requirements. The Company intends to
establish other sources of wafer supply for its products as such arrangements
become useful or necessary, and is presently

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negotiating additional foundry contracts. Worldwide semiconductor foundry
capacity remains limited, however, and the Company cannot guarantee that
manufacturing capacity constraints will not pose significant problems in the
future.

The Company has purchased a 17% equity interest in Cypress Semiconductor
(Texas) Inc. (CSTI), a subsidiary of Cypress Semiconductor Corporation. Pursuant
to the agreements governing this transaction, Altera can obtain wafer supply
from CSTI approximately in proportion to its percentage ownership in CSTI. This
investment provides Altera with the option to design, produce, and market
certain sole-sourced products and to access the next generation process
technology at CSTI. The Company uses this facility for the manufacture of all of
its MAX 5000 products. Cypress Semiconductor, which has manufacturing and
marketing rights to certain MAX 5000 products, also manufactures its own
products in the CSTI facility.

The manufacture of advanced CMOS semiconductor wafers is a highly complex
process, and the Company has from time to time experienced difficulties in
obtaining anticipated or acceptable yields and timely deliveries from its
suppliers. Good production yields are particularly important to the Company's
business, including its ability to meet customers' demand for products and to
maintain profit margins. State-of-the-art manufacture of semiconductor products
is sensitive to a wide variety of factors, including the level of contaminants
in the manufacturing environment, impurities in the materials used, and the
performance of personnel and equipment. No assurance can be given that the
Company will not experience significant production yield problems with any of
its product lines, including the Company's newer FLASH and SRAM-based logic
chips. Disruptions or adverse supply conditions arising from market conditions,
political strife, labor disputes and disruptions, natural or man-made disasters,
normal process fluctuations, variances in manufacturing yields, or other factors
could adversely affect the Company's operating results. The Company also expects
that, as is customary in the semiconductor business, it will in the future seek
to convert its fabrication process arrangements to larger wafer sizes, to more
advanced process technologies, or to new suppliers in order to maintain or
enhance its competitive position. Such conversions entail inherent technological
risks that can adversely affect yields and delivery times. In addition, if for
any reason the Company were required to seek alternative sources of supply,
shipments could be delayed, and any significant delay would have an adverse
effect on the Company's operating results.

In 1994 and prior years, the Company purchased the majority of its
materials and services in U.S. dollars. Thus, the Company's manufacturing costs
have not been subject to substantial currency exchange fluctuations in the past.
However, certain contracts for silicon wafer purchases are denominated in
Japanese yen, and the volume of such contracts increased significantly in 1994;
further increases are anticipated in 1995. The increase of yen-denominated
purchases in 1994 and the declining value of the dollar with respect to the yen
had an adverse impact on the Company's margins. The Company was able to mitigate
much of that impact with improved yields and efficiencies. However, there is no
assurance that such improvements will occur in future years. Moreover, the
dollar has dropped sharply in value against the yen in early 1995, and there is
no assurance that the value of the dollar with respect to the yen will not
deteriorate further. Accordingly, the impact of foreign currency exchange rate
fluctuations is expected to be more significant in the future.

After wafer manufacturing is completed, each wafer is tested using a
variety of test and handling equipment. These tested wafers are assembled in
Korea, Hong Kong, Malaysia, and the Philippines by subcontractors. In assembly,
the wafers are separated into individual chips which are then encapsulated in
ceramic or plastic packages. Although the Company's assembly subcontractors have
not recently experienced any serious work stoppages, the political situations in
these countries are volatile, and any prolonged work stoppages or other
inability of the Company to assemble its products would have a serious adverse
effect on the Company's operating results. Furthermore, economic risks, such as
changes in tax laws, tariff or freight rates, or interruptions in air
transportation, could adversely affect the Company's operations.

Following assembly, the packaged units receive further testing either at
Altera's facilities in San Jose, CA, or by subcontractors in the Far East.
Altera has developed sophisticated proprietary

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test software and hardware that provides relatively high speed, back-end
testing. After final testing, each unit goes through marking and final
inspection prior to shipment to customers.

Much of the manufacturing, assembly, testing, and packaging of Altera's
development system hardware products is done by outside contractors.

MARKETING, SALES, AND CUSTOMERS

The Company markets its products in the United States and Canada through a
network of direct sales personnel, independent sales representatives, and
electronics distributors to a broad range of customers. The Company's direct
sales personnel and independent sales representatives focus on major target
accounts. Distributors generally focus selling activities on the broad base of
small and medium-size customers and often provide stocking, kitting, and
programming services, even to larger accounts.

In the United States, Altera's major distributors currently include
Arrow/Schweber Electronics Inc. ("Arrow") and Wyle Electronics Marketing Group,
a division of Wyle Laboratories ("Wyle"), which provide nationwide coverage, and
Pioneer-Standard Electronics, Inc. covering the eastern half of the United
States. From time-to-time the Company expects that it may add or delete
distributors from its selling organization as it deems appropriate to the level
of business.

To support its distribution network and focus on the target accounts and
the direct OEM channel of business, the Company has 23 manufacturer's
representative firms throughout the United States and Canada. At December 31,
1994, domestic sales offices were located in San Jose and in the metropolitan
areas of Los Angeles, Chicago, Boston, Atlanta, Dallas, Austin, Denver, Raleigh,
and New York.

The Company's international business is supported by a network of technical
distributors throughout Europe and the Far East. The Company has representation
in every major European country, in Israel, Japan, Australia, South America, and
the Pacific Rim. International sales management offices are located in the
metropolitan areas of London, Paris, Munich, Turin, Seoul, Ontario, Hong Kong,
and Tokyo.

Customer service and support are important aspects of the CMOS programmable
logic integrated circuit business. Altera provides several levels of user
support, including applications assistance, design services, and customer
training. The Company's applications engineering staff publishes data sheets and
application notes, conducts technical seminars, and provides on-line design
assistance via modem links to the customer's design station. Customer service is
supported with inventory maintained both at the factory and at distributors'
locations to provide short-term delivery of development systems and logic chips.

The Company sells products through domestic and international distribution,
and direct to OEMs. During 1992, 1993, and 1994, export sales constituted 48%,
49%, and 48% of sales, respectively. Sales to Europe were $27.8 million, $34.5
million, and $42.6 million, and to Japan were $13.3 million, $24.7 million, and
$37.6 million in 1992, 1993, and 1994, respectively. Through 1994, almost all
export sales were denominated in U.S. currency. However, the Company is
considering doing an increased amount of business in local currency in the
future. Altera's export sales are subject to risks common to all export
activities, including governmental regulation, possible imposition of tariffs or
other trade barriers, and currency fluctuations. Certain export sales must be
licensed by the Office of Export Administration of the U.S. Department of
Commerce. Although from time to time the Company has experienced delays in
obtaining the necessary licenses, to date such delays have not had a material
adverse effect on the Company's business.

Two distributors each accounted for approximately 15% and 14% of sales in
1994, and approximately 10% each of sales in 1993. One distributor accounted for
more than 10% of sales in

9
<PAGE> 11
1992. No direct OEM customer accounted for more than 10% of the Company's sales
in 1992, 1993, or 1994.

The semiconductor industry overall has historically been characterized by
volatile business cycles. In the past, when the industry experienced a
significant economic downturn, characterized by diminished product demand and
accelerated erosion of average selling prices, the Company was not as severely
affected by the semiconductor downturn as companies selling standard commodity
products, due to the Company's relatively small revenue base and the specialized
nature of the market for its products. Now, as the Company has grown larger and
the market in which it participates has become more mature and more competitive,
the Company's results are more affected by economic factors. For example, in
1994, FLEX prices were reduced significantly in order to stimulate growth and
design activity. In 1992, the Japanese economy weakened considerably and the
Company's business there declined sharply. Also during 1992, one of the
Company's licensed second sources became much more price competitive, causing a
significant decrease in the average selling price of the Company's MAX 5000
chips. The Company expects that economic and competitive factors such as these
will have a greater impact on its business and operating results in the future.

BACKLOG

The Company's backlog of released orders at December 31, 1994 was
approximately $51.8 million as compared to approximately $23.6 million at
December 31, 1993. The Company includes in its backlog OEM customer-released
orders that are requested for delivery within the next 12 months, and
distributor orders requested for delivery within the next six months. The
Company produces standard products which may be shipped from inventory within a
short time after receipt of an order. The Company's business in particular, and
to some extent that of the entire semiconductor industry, is characterized by a
high percentage of short-term orders with short-term shipment schedules (turns
orders), rather than long-term volume purchase contracts. Orders constituting
the Company's current backlog are cancelable without significant penalty at the
option of the purchaser. Accordingly, backlog as of any particular date should
not be used as a measure of sales for any future period.

PATENTS AND LICENSES

The Company owns more than 50 United States patents and has additional
pending United States patent applications. The Company also has various licenses
from Advanced Micro Devices, Inc. ("AMD"), Cypress Semiconductor, Intel, and
Texas Instruments relating to the design, manufacture, and packaging of
programmable logic products. Although these patents, patent applications, and
licenses may have value in discouraging competitive entry into the Company's
market segment, the Company believes that its future success will depend
primarily upon the technical competence and creative skills of its personnel
rather than on its patents. Furthermore, there can be no assurance that any
additional patents will be granted to Altera or that Altera's patents will
provide meaningful protection from competition.

The Company has entered into technology cross-licensing agreements with
Cypress Semiconductor and Texas Instruments, in connection with wafer supply and
second source relationships. Pursuant to these agreements, the Company has been
granted rights to procure wafers from these companies and to design products
using certain technology that may be protected by such companies' patents. The
Company has, in turn, granted Cypress Semiconductor and Texas Instruments rights
to manufacture and sell certain of the Company's products. In each of the
Company's product license agreements, the licensee has been granted a license
with respect to a limited portion of the Company's overall product line. Sharp,
TSMC, and Intel manufacture wafers for the Company but do not have rights to
sell the Company's products. The Company's wafer supply agreements do not
require minimum purchases by the Company.

10
<PAGE> 12
An agreement with Cypress Semiconductor covers certain of the Company's MAX
5000 family products. An initial agreement, entered into in June 1987, was
terminated on November 23, 1993, though product licenses continue after
termination. In April 1990, the Company entered into an additional agreement
with Cypress Semiconductor regarding an 17% equity investment in CSTI and a
related supply agreement. This supply agreement was amended effective November
23, 1993, and currently is in effect. See "Manufacturing."

The agreement with Texas Instruments covers certain chip types within the
Classic family and the possible production of certain other Altera products. The
agreement was entered into in July 1988 and has a term of seven years. It was
amended in 1990 to include only particular Classic products and certain foundry
services to Altera.

The Company entered into an intellectual property cross-licensing agreement
with Intel as part of the Company's purchase of Intel's PLD division in October
1994. The agreement continues for the lives of the licensed patents, and is
perpetual with respect to other licensed intellectual property.

In March 1987, the Company and Monolithic Memories, Inc. (MMI) entered into
an agreement cross-licensing all of each others' patents covering programmable
and reprogrammable logic devices and processes for making such devices having a
first filing date prior to April 1, 1989, as part of the settlement of a patent
suit against the Company. This agreement covered only patents, and no products
or non-patented technology was licensed to either company as a result of this
agreement. In connection with the settlement, Altera issued 600,000 shares of
its capital stock to MMI. In March, 1988, AMD succeeded to MMI's rights and
responsibilities under the license agreement, and agreed to be bound by the
terms of the agreement, in connection with its acquisition of MMI. As of June
30, 1990, AMD no longer held the 600,000 shares of Altera stock it acquired from
MMI. In March 1994, AMD informed the Company that it believes the scope of the
patent license described above is more limited than the Company has interpreted
such license in the past. In September, 1994, AMD sued the Company on patents
for which the Company believes it is licensed. AMD and the Company are presently
discussing these matters, but discussions have only recently begun, and it is
not yet possible to determine what effect, if any, these matters might have on
the operations of the Company (see Item 3. Legal Proceedings).

As a result of its various technology licensing agreements, the Company has
been granted royalty-free rights to design, manufacture, and package products
using certain patents controlled by AMD, Cypress Semiconductor, Intel, and Texas
Instruments. The Company believes that these licenses will assist the Company in
developing further products. The Company attempts to ensure that its products
and processes do not infringe the patent and proprietary rights of others, but
cannot be certain that they are not doing so. Other companies have filed
applications for, or have been issued, other patents and may obtain additional
patents and proprietary rights relating to products or processes competitive
with those of the Company. Also, the Company, in the normal course of business,
from time to time receives and makes inquiries with respect to possible patent
infringements. As a result of inquiries received, it may be necessary or
desirable for the Company to obtain additional licenses relating to one or more
of its current or future products. There is no assurance that such additional
licenses could be obtained, and, if obtainable, could be obtained on conditions
which would not have a materially adverse financial effect on the Company. As a
result of inquiries made, it may be necessary or desirable for the Company to
incur litigation expenses to enforce its intellectual property rights. There is
no assurance that any such litigation would be successful, or that the Company's
patents would be upheld if challenged.

RESEARCH AND DEVELOPMENT

The Company's research and development activities have focused primarily on
general-purpose programmable logic chips and on the associated development
software and hardware. The Company has developed these related products in
parallel to provide software support to customers simultaneously with circuit
introduction. Altera believes that advanced software tools are a critical

11
<PAGE> 13
factor in the advancement of programmable semiconductor technology. Since 1991,
the Company's research and development activities have been primarily directed
toward the design of the MAX 7000 integrated circuits and subsequently the MAX
9000, FLEX 8000, and FLEX 10K circuits, as well as the development of new
software and hardware for these circuits, cost reductions and advancements in
other existing products, and development of alternative architectures and
technologies. In 1994, the Company announced the MAX 9000 family and an enhanced
version of the FLEX 8000 family (the 8000A family) using 0.6 micron, three layer
metal technology. In 1995, the Company announced the FLEX 10K family.

The Company's research and development expenditures in 1992, 1993, and 1994
were $15,826,000, $16,847,000, and $22,249,000 (excluding an R&D In Process
charge of $23,745,000 associated with the Intel PLD acquisition), respectively.
The Company has not capitalized research and development or software costs to
date. The Company intends to continue to spend substantial amounts on research
and development in order to continue to develop new products and achieve market
acceptance for such products. The commercial success of these products will
depend upon the achievement of targeted yield, product cost, and performance
levels and the development of manufacturing, marketing, and support
capabilities. Even if such goals are accomplished, there can be no assurance
that these products will achieve significant market acceptance. Moreover, the
Company must continue to make significant investments in research and
development in order to continue to develop new products and achieve market
acceptance for such products, particularly in light of the industry pattern of
price erosion for mature products and increasing competition in the programmable
logic market. If the Company were unable to successfully define, develop, and
introduce competitive new products, its future operating results would be
adversely affected.

COMPETITION

The semiconductor industry overall is intensely competitive and is
characterized by rapid technological change, rapid rates of product
obsolescence, and price erosion. The industry includes many large domestic and
foreign companies which have substantially greater financial, technical, and
marketing resources than the Company.

The principal factors of competition in the CMOS programmable logic
marketplace include the capability of software development tools, the
integration capacity and flexibility of the individual circuits, product
performance and features, quality and reliability, pricing, technical service
and support, and the ability to respond rapidly to technical innovation. The
Company believes it competes favorably with respect to these factors, although
it may be at a disadvantage in comparison to larger companies with broader
product lines, greater technical service and support capabilities, and internal
wafer fabrication capabilities. The Company believes, however, that its
proprietary device architecture and its installed base of development systems
with proprietary software may provide some competitive advantage.

The Company's competition for its general-purpose programmable logic chips
has come from many sources. The Company's licensees, Cypress Semiconductor,
Texas Instruments, and, formerly, Intel, compete on their particular licensed
products. Licensees can compete directly with pin-compatible parts even after a
customer has chosen to design its product using the Company's chips. In
anticipation of this, the Company structured its licenses so that each
individual licensee has rights to a limited portion of the Company's overall
product line. In addition, the Company's agreement with Cypress Semiconductor
and CSTI allows the Company to manufacture certain products without granting
second source rights. At present, only Cypress competes directly with
pin-compatible parts, on the MAX 5000 family.

The Company also experiences significant competition from a number of other
companies which are in the market with products competitive with those of the
Company. These companies include major domestic and international semiconductor
companies, traditional programmable logic and application-specific circuit
manufacturers, and emerging companies. Among these are

12
<PAGE> 14
companies such as Advanced Micro Devices, Inc., AT&T, Atmel Corporation, Xilinx,
Inc., Actel Corporation, and Lattice Semiconductor Corporation. As the average
pin count and functional density of the Company's products continue to increase,
the Company expects to compete to an increasing extent with suppliers of
products marketed as Field Programmable Gate Arrays (FPGAs), and with ASIC
suppliers.

A number of very large, well-financed companies have announced their
intentions to compete with the Company in its core business, and in some cases
are already shipping products. These companies, including AT&T, Motorola, and
others, all have proprietary wafer manufacturing ability, preferred vendor
status with many of the Company's customers, extensive marketing power and name
recognition, much greater financial resources than those of the Company, and
other significant advantages over the Company. As the dollar volume of the
Company's business grows, the attractiveness of that business to larger, more
powerful competitors will continue to increase.

Substantial direct or indirect competition could have a significant adverse
effect on the Company's future sales and operating results.

EMPLOYEES

As of December 31, 1994, the Company had 667 regular employees: 207 in
engineering and development, 197 in sales and marketing, 200 in manufacturing,
and 63 in administration and finance. The success of the Company is dependent in
large part upon the continued service of its key management, technical, sales,
and support employees and on its ability to continue to attract and retain
additional qualified employees. The competition for such employees is intense
and their loss as employees could have an adverse effect on the Company.

ITEM 2. PROPERTIES.

The Company's headquarters are in facilities in San Jose, California
totaling approximately 220,000 square feet. Design, limited manufacturing,
research, marketing, and administrative activities are performed in these
facilities. The Company occupies these properties under non-cancelable leases
which expire in 1997, and under which it has multiple options to renew for up to
17-1/2 years on the majority of the premises. The Company also leases on a
short-term basis small office facilities for its sales staff in the metropolitan
areas of Los Angeles, Chicago, Boston, Atlanta, Dallas, Austin, Denver, Raleigh,
New York, London, Paris, Munich, Turin, Seoul, Toronto, Hong Kong, and Tokyo.

ITEM 3. LEGAL PROCEEDINGS.

In June 1992, a class action lawsuit was filed against the Company and
certain of its current and former officers and directors, alleging violations of
the federal securities laws. A second complaint, containing similar allegations,
was filed in August 1992. The two complaints were subsequently consolidated into
one class action. This matter was settled out of court in July 1994.

In June 1993, a lawsuit was filed against the Company by Xilinx, Inc.,
alleging infringement of certain patents held by Xilinx. The complaint seeks
unspecified compensatory damages and costs and attorneys' fees, and an
injunction prohibiting continuing infringement. Xilinx subsequently filed a
Motion for Preliminary Injunction to prohibit the manufacture and sale of FLEX
8000 products by Altera. In February 1994, Xilinx expanded its infringement
claims to cover the Company's MAX 5000 and MAX 7000 products in addition to the
FLEX 8000 products. The court ruled against the Motion for Preliminary
Injunction in April 1994. Limited discovery has taken place in the case. The
Company disputes the merits of Xilinx's allegations and intends to defend this
action vigorously.

13
<PAGE> 15
continuing infringement. The complaint was amended in July 1993 to add
allegations of infringement of an additional patent. In June 1994, Xilinx filed
motions for Summary Judgment asking the court to dismiss most of Altera's suit
against Xilinx. In December 1994, the court denied these motions. Significant
discovery has taken place, but the court has not yet set a schedule for trial.
The Company intends to pursue this action vigorously.

Xilinx has moved to consolidate the two lawsuits, and in October 1994, the
court denied this motion. Recently a special master was appointed by the court
to assist in both lawsuits, though the duties of the special master have not yet
been fully established. Due to the nature of the litigation with Xilinx and
because the lawsuits are still in pre-trial stage, management cannot estimate
the total expenses, the possible loss, if any, or the range of loss that may
ultimately be incurred in connection with the allegations. Management cannot
ensure that Xilinx will not succeed in obtaining an injunction against the
manufacture and sale of the MAX 5000, MAX 7000, or FLEX 8000 families of
products, or succeed in invalidating any of the Company's patents. However,
based on the facts currently known, management does not believe that these
matters will have a material adverse effect on the financial position of the
Company.

In August 1994, a lawsuit was filed against the Company by Advanced Micro
Devices (AMD) alleging infringement of certain patents held by AMD by the MAX
7000 product family. The complaint seeks unspecified compensatory damages and
costs and attorneys fees, and an injunction prohibiting continuing infringement.
In September 1994 Altera filed a counter-claim against AMD alleging
infringement of certain patents held by the Company. Limited discovery has taken
place. The Company intends to defend against AMD's claim, and to pursue its
counterclaim, vigorously. Due to the nature of the litigation with AMD, and
because the lawsuit is at an early stage, management cannot estimate the total
expenses, the possible loss, if any, or the range of loss that may ultimately be
incurred in connection with the allegations. Management cannot ensure that AMD
will not succeed in obtaining an injunction against the manufacture and sale of
the MAX 7000 product family, or succeed in invalidating any of the Company's
patents. However, based on the facts currently known, management does not
believe that this matter will have a material adverse effect on the financial
position of the Company.

14
<PAGE> 16

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

The annual meeting of shareholders of the Company was held on November 16,
1994 at 10:00 a.m., at which the following matters were acted upon:
<TABLE>
<CAPTION>

Votes
Votes Withheld/ Broker
Matter Acted Upon Votes For Against Abstentions Non-Votes
----------------- --------- ------- ----------- ---------
<S> <C> <C> <C> <C>

1. Election of Directors:

Rodney Smith 19,051,445 0 34,308 0
Michael A. Ellison 19,054,534 0 31,219 0
Paul Newhagen 19,053,787 0 31,966 0
Robert W. Reed 19,053,818 0 31,935 0
William E. Terry 19,058,222 0 27,531 0

2. Approval of amendment to the 14,146,652 4,883,935 55,166 0
1988 Director Stock Option Plan to
increase from 16,000 to 20,000 the
number of shares in the First Option
and from 4,000 to 5,000 the
number of shares granted annually
to each eligible director.

3. Ratification of Price Waterhouse as 19,027,214 30,503 28,036 0
independent accountants for the
Company for the year ended
December 31, 1994.

4. To adopt an active policy to seek 3,412,848 13,011,781 374,937 2,286,187
qualified women and minority
candidates for nomination to the
Board of Directors, set a timetable
for implementing that policy, and
report to the shareholders about
what the new policy has achieved
at the next annual meeting.
</TABLE>

15
<PAGE> 17
PART II

ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

The textual portion of the section entitled "About Your Investment"
and the section entitled "Corporate Directory" in the Company's 1994 Annual
Report to Shareholders for the year ended December 31, 1994 ("1994 Annual
Report") are incorporated herein by reference.

The Company believes factors such as quarter-to-quarter variances in
financial results, announcements of new products, new orders, and order rate
variations by the Company or its competitors could cause the market price of its
Common Stock to fluctuate substantially. In addition, the stock prices for many
high technology companies experience large fluctuations, which are often
unrelated to the operating performance of the specific companies. Broad market
fluctuations, as well as general economic conditions such as a recessionary
period or high interest rates, may adversely affect the market price of the
Company's Common Stock.

ITEM 6. SELECTED FINANCIAL DATA.

The section entitled "Selected Consolidated Financial Data/Five-Year
Summary" in the Company's 1994 Annual Report is incorporated herein by
reference.

ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.

The textual portion of the section entitled "Management's Discussion
and Analysis of Financial Conditions and Results of Operations" in the
Company's 1994 Annual Report is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

The consolidated financial statements, together with the report thereon
of Price Waterhouse LLP dated January 18, 1995 and the section entitled
"Selected Consolidated Financial Data/Quarterly Data (Unaudited)" in the
Company's 1994 Annual Report are incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.

None.

16
<PAGE> 18

PART III

ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

The executive officers and directors of the Company and their ages
are as follows:

<TABLE>
<CAPTION>
Name Age Position with the Company
---- --- -------------------------
<S> <C> <C>

Rodney Smith 54 Chairman of the Board of Directors; President;
and Chief Executive Officer
Denis Berlan 44 Vice President, Operations and Product Engineering
Erik Cleage 34 Vice President, Marketing
Clive McCarthy 48 Vice President, Development Engineering
Paul Newhagen (1)(3) 45 Director; Vice President, Administration
Thomas J. Nicoletti 48 Vice President, Finance; Chief Financial Officer
James Sansbury 50 Vice President, Technology
Sandra J. Scarsella 46 Vice President, Human Resources
Peter Smyth 57 Vice President, Sales
Michael A. Ellison (1)(2)(3) 49 Director
Robert W. Reed (1)(3) 48 Director
William E. Terry(1)(2) 61 Director
</TABLE>
_____________________
(1) Member of Nominating Committee.
(2) Member of Compensation Committee.
(3) Member of Audit Committee.

All directors hold office until the next annual meeting of shareholders
or until their successors have been elected and qualified. There are no family
relationships between any of the directors or executive officers of the Company.

Rodney Smith joined the Company in November 1983 as Chairman of the
Board of Directors, President, and Chief Executive Officer. Prior to that time,
he held various management positions with Fairchild Semiconductor Corporation
("Fairchild"), a semiconductor manufacturer.

Denis M. Berlan joined the Company in December 1989 as Vice President,
Product Engineering, and was named Vice President, Operations and Product
Engineering in October 1994. He was previously employed by Advanced Micro
Devices, Inc. ("AMD"), a semiconductor manufacturer, and by Lattice
Semiconductor Corporation, a semiconductor manufacturer, in engineering
management capacities.

Erik Cleage joined the Company as International Marketing Manager in
February 1986. He became Director, Japan and Asia Pacific Sales in April 1989,
and was appointed Vice President, Marketing in August 1990. Previously, he was
employed by AMD and Fairchild in various positions.

Clive McCarthy joined the Company in February 1984 as Director of
Applications. He was appointed Vice President of Software in March 1987. In
March 1990 he was appointed Vice President of Development Engineering. Prior to
joining the Company, Mr. McCarthy had been

17
<PAGE> 19

employed by Fairchild, Northern Telecom, and Texas Instruments in various
technical and marketing management positions.

Paul Newhagen, a co-founder of the Company, has served as a director of
the Company since July 1987 and as Vice President of Administration since
December 1994. Mr. Newhagen served as Vice President of the Company from
November 1992 to February 1993, Secretary from July 1987 to January 1993, Vice
President of Finance and Administration from June 1983 to November 1992, and
Chief Financial Officer from June 1983 to February 1993. From June 1993 to
November 1994, Mr. Newhagen served as a consultant to the Company.

Thomas J. Nicoletti joined the Company in October 1992 as Vice
President of Finance and was appointed Chief Financial Officer in February 1993.
Previously, he was Chief Financial Officer for Procase, Inc., a software
company, and for Lam Research Corporation, a semiconductor equipment
manufacturer. Prior to that, Mr. Nicoletti was employed by Fairchild and AMD in
various accounting and financial positions.

James Sansbury, a co-founder of the Company, served as Vice President
of Technology and Operations from June 1983 to March 1987. Since March 1987, he
has served as Vice President of Technology. He was previously employed by
Hewlett-Packard Company ("Hewlett-Packard"), an electronics manufacturer.

Sandra J. Scarsella joined the Company in March 1991 as Vice President
of Human Resources. She was previously associated with Intel Corporation in a
variety of Human Resources management positions.

Peter Smyth joined the Company in May 1990 as Vice President of Sales.
Prior to joining the Company, Mr. Smyth served as Vice President of Sales at
Precision Monolithics, Inc., a semiconductor manufacturer, and Vice President of
North American Sales at Mostek, a semiconductor manufacturer. Mr. Smyth was
also previously associated with Texas Instruments in a variety of sales and
marketing capacities.

Michael A. Ellison has served as a director of the Company since April
1984. Mr. Ellison is a venture capital investor and since October 1994 has been
the Chief Executive Officer of Steller, Inc., a distributor of electronic parts.
Until December 1992, he was a General Partner at Cable & Howse Ventures, a
venture capital investment firm. Mr. Ellison also serves as a director of Wall
Data Incorporated.

Robert W. Reed has served as a director of the Company since October
1994. Since 1991, Mr. Reed has been a Senior Vice President of Intel
Corporation, a semiconductor manufacturer, and General Manager of its
Semiconductor Products Group, which includes Flash Memory Products, Intel's
Military and Special Products Division, and Intel's embedded microcontrollers
and microprocessors. Previously, Mr. Reed was Intel's Chief Financial Officer.

William E. Terry has served as a director of the Company since August
1994. Mr. Terry is a former director and Executive Vice President of the
Hewlett-Packard Company, a diversified electronics manufacturing company. At
Hewlett-Packard, he held a number of senior management positions, including
general manager of Hewlett-Packard's Data Products and Instrument Groups, and
subsequently had overall responsibility for the Measurement Systems Sector. He
retired from Hewlett-Packard in November 1993. Mr. Terry also serves as a
director of Key Tronic Corporation.

ITEM 11. EXECUTIVE COMPENSATION.

The section entitled "Executive Compensation" and the section entitled
"Changes to Benefit Plans" in the Company's Proxy Statement dated March 16,
1995 ("Proxy Statement") are incorporated herein by reference.

18
<PAGE> 20

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The section entitled "Security Ownership of Certain Beneficial Owners
and Management" in the Company's Proxy Statement is incorporated herein by
reference.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.

The section entitled "Director Compensation" and the section entitled
"Certain Business Relationships" in the Company's Proxy Statement are
incorporated herein by reference.

19
<PAGE> 21

PART IV

ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.

<TABLE>
<CAPTION>
<S> <C> (a) 1. Financial Statements.

The following documents from the Annual Report to Shareholders are filed as part of this report:

Consolidated Statements of Operations for each of the
three years in the period ended December 31, 1994
Consolidated Balance Sheets at December 31, 1994 and
December 31, 1993
Consolidated Statements of Cash Flows for each of the
three years in the period ended December 31, 1994
Consolidated Statements of Shareholders' Equity for each of the
three years in the period ended December 31, 1994
Notes to Consolidated Financial Statements
Report of Independent Accountants

2. Financial Statement Schedules.

All schedules have been omitted as they are either not required, not applicable, or the required
information is included in the financial statements or notes thereto.

3. Exhibits.
</TABLE>

<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------ -------
<S> <C>
2.1* Asset Purchase Agreement dated as of July 12, 1994 by and between
the Company and Intel Corporation (8).
2.2* Amendment No. 1 to Asset Purchase Agreement dated as of October
1, 1994 by and between the Company and Intel Corporation (8).
2.3 Investor Agreement dated as of July 12, 1994 by and between the
Company and Intel Corporation (8).
3.1 Restated Articles of Incorporation of the Company filed May 23,
1990. (5)
3.3 Amended and Restated Bylaws of the Company, as amended through
August 18, 1994.
4.1 Specimen copy of certificate for shares of Common Stock of the
Registrant.(7)
10.1* License Agreement dated as of July 12, 1994 with Intel Corporation. (9)
10.2* Supply Agreement dated as of July 12, 1994 with Intel Corporation. (9)
10.3(a)+ 1987 Stock Option Plan, and forms of Incentive and Non statutory Stock
Option Agreements, as amended January 18, 1995.
10.4(b)+ 1987 Employee Stock Purchase Plan, and form of Subscription Agreement,
as amended January 18, 1995.
10.6* Technology License and Manufacturing Agreement with Cypress
Semiconductor Corporation, dated June 19, 1987. (1)
10.6(a)* Termination Agreement dated November 23, 1993, regarding Technology
License and Manufacturing Agreement with Cypress Semiconductor
Corporation. (7)
10.8 Product Distribution Agreement with Pioneer-Standard Electronics,
Inc., effective May 30, 1984, as amended. (1)
</TABLE>

20
<PAGE> 22
<TABLE>
<CAPTION>

Exhibit
Number Exhibit
------- -------
<S> <C>
10.11 Form of Sales Representative Agreement. (1)
10.22* Advanced Micro Devices, formerly MMI, Settlement Agreement and
associated Series E Preferred Stock Purchase Agreement and Patent
License Agreement, all dated March 31, 1987. (1)
10.23 Amended and Restated Lease Agreement with Orchard Investment
Company Number 611, dated November 10, 1989, for lease of Buildings
B and C at 2610 Orchard Parkway, San Jose, California. (3)
10.24 First Amendment, effective February 5, 1990, to Lease Agreement with
Orchard Investment Company Number 611. (3)
10.25 Product Distribution Agreement with Wyle Electronics Marketing Group,
effective May 16, 1984, as amended. (1)
10.26 Form of Indemnification Agreement entered into with each of the
Company's officers and directors.
10.30* Technology License and Manufacturing Agreement with Texas Instruments
Incorporated, dated July 1, 1988. (2)
10.30(a)* Amendment No. 2 to Technology License and Manufacturing Agreement with
Texas Instruments Incorporated, dated effective October 1, 1990. (5)
10.31 Product Distribution Agreement with LEX Electronics, Inc., formerly
Schweber Electronics Corporation effective December 22, 1988. (2)
10.31(a) Consent to Assignment of Product Distribution Agreement, effective
September 23, 1991. (6)
10.33(b)+ 1988 Director Stock Option Plan and forms of Outside Director
Nonstatutory Stock Option Agreement, as amended January 18, 1995.
10.34* Foundry and PROM II.5 Process Technology License Agreement with
Cypress Semiconductor Corporation and Cypress Semiconductor (Texas)
Inc., dated April 24, 1990. (4)
10.34(a)* Amendment Number 1 dated November 23, 1993, regarding Foundry
and PROM II.5 Process Technology License Agreement with Cypress
Semiconductor Corporation and Cypress Semiconductor (Texas) Inc. (7)
10.35 Master Distribution Agreement with Japan Macnics Corporation dated
June 26, 1986, as amended effective March 18, 1987. (6)
10.37 LSI Products Supply Agreement with Sharp Corporation, dated
October 1, 1993. (7)
10.38+ Altera Corporation Nonqualified Deferred Compensation Plan and
Trust Agreement dated February 1, 1994, and form of Deferred
Compensation Agreement. (7)
11.1 Computation of Earnings per Share.
13.1 Annual Report to Shareholders for the fiscal year ended December
31, 1993 (to be deemed filed only to the extent required by the
instructions to Exhibits for Reports on Form 10-K).
21.1 Subsidiaries of the Registrant.
24.1 Consent of Price Waterhouse LLP (see page 23).
25.1 Power of Attorney (included on pages 24-25).
27 Financial Data Schedule.

</TABLE>
__________
(1) Incorporated by reference to identically numbered exhibits filed in
response to item 16(a), "Exhibits," of the registrant's Registration
Statement on Form S-1, as amended, (File No. 33-17717) which became
effective March 29, 1988.
(2) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1988.

21
<PAGE> 23

(3) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1989.
(4) Incorporated by reference to identically numbered exhibits filed in
response to Item 6(a), "Exhibits," of the registrant's Report on Form
10-Q for the quarter ended March 31, 1990, as amended by a Form 8 filed
on July 13, 1990.
(5) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1990.
(6) Incorporated by reference to identically numbered exhibits filed in
response to Item 14(a), "Exhibits," of the registrant's Report on Form
10-K for the fiscal year ended December 31, 1992.
(7) Incorporated by reference to identically numbered exhibits field in
response to Item 14(a), "Exhibits," of the registrants Report on Form
10-K for the fiscal year ended December 31, 1993.
(8) Incorporated by reference to identically numbered exhibits field in
response to Item 7, "Exhibits," of the registrants' Report on Form 8-K
dated October 15, 1994 and 8-KA dated December 15, 1994
(9) Incorporated by reference to identically numbered exhibits filed in
response to Item 6(a), "Exhibits," of the registrant's Report on Form
10-Q for the quarter ended September 30, 1994
* Confidential treatment has previously been granted for portions of this
exhibit pursuant to an order of the Commission.
** Confidential treatment requested.
+ Management contract or compensatory plan or arrangement required to be
filed as an exhibit to this Report on Form 10-K pursuant to Item 14(c)
thereof.

(b) Reports on Form 8-K.

On December 15, 1994, the Company filed its report on Form
8-K/A (the "Form 8-K/A") supplementing the Company's filing on Form 8-K
filed on October 15, 1994 (the "Form 8-K"). The Form 8-K reported on
the Company's acquisition of the programmable logic device division of
Intel Corporation. The Form 8-K/A included financial statements
related to that acquisition.

22
<PAGE> 24

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in the Prospectus
constituting part of the Registration Statements on Form S-8 (No. 33-22877,
No. 33-37159, and No. 33-57350) of Altera Corporation of our report dated
January 18, 1995 appearing in the Annual Report to Shareholders which is
incorporated in this Annual Report on Form 10-K.

/s/ PRICE WATERHOUSE LLP

PRICE WATERHOUSE LLP

San Jose, California
March 27, 1995

23
<PAGE> 25

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report on Form 10-K to
be signed on its behalf, by the undersigned thereto duly authorized.

ALTERA CORPORATION
------------------
Registrant

By: /S/ RODNEY SMITH
-----------------------
Rodney Smith, President and
Chief Executive Officer

March 27, 1995

POWER OF ATTORNEY

Know all persons by these presents, that each person whose signature
appears below constitutes and appoints Rodney Smith and Thomas J. Nicoletti,
jointly and severally, his attorneys-in-fact, each with the power of
substitution, for him in any and all capacities, to sign any amendments to this
Report on Form 10-K, and to file the same, with exhibits thereto and other
documents in connection therewith, with the Securities and Exchange Commission,
hereby ratifying and confirming all that each of said attorneys-in-fact, or his
substitute or substitutes, may do or cause to be done by virtue hereof.

24
<PAGE> 26

Pursuant to the requirements of the Securities Exchange Act of 1934,
this Report on Form 10-K has been signed below by the following persons on
behalf of the registrant and in the capacities and on the dates indicated:

<TABLE>
<CAPTION>
Signature Capacity in Which Signed Date
--------- ------------------------ ----
<S> <C> <C>

/S/ RODNEY SMITH President, Chief Executive March 20, 1995
----------------------------- Officer (Principal Executive
Rodney Smith Officer), and Chairman of
the Board of Directors

/S/ THOMAS J. NICOLETTI Vice President - Finance March 24, 1995
----------------------------- and Chief Financial Officer
Thomas J. Nicoletti (Principal Financial and
Accounting Officer)

/S/ MICHAEL A. ELLISON Director March 23, 1995
-----------------------------
Michael A. Ellison

/S/ PAUL NEWHAGEN Director March 22, 1995
-----------------------------
Paul Newhagen

/S/ROBERT W. REED Director March 22, 1995
-----------------------------
Robert W. Reed

/S/WILLIAM E. TERRY Director March 22, 1995
-----------------------------
William E. Terry

</TABLE>
25
<PAGE> 27

INDEX TO EXHIBITS

<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<S> <C>
2.1* Asset Purchase Agreement dated as of July 12, 1994 by and
between the Company and Intel Corporation (8).
2.2* Amendment No. 1 to Asset Purchase Agreement dated as of
October 1, 1994 by and between the Company and Intel
Corporation (8).
2.3 Investor Agreement dated as of July 12, 1994 by and between the
Company and Intel Corporation (8).
3.1 Restated Articles of Incorporation of the Company filed May 23,
1990. (5)
3.3 Amended and Restated Bylaws of the Company, as amended
through August 18, 1994.
4.1 Specimen copy of certificate for shares of Common Stock of the
Registrant. (7)
10.1* License Agreement dated as of July 12, 1994 with Intel
Corporation. (9)
10.2* Supply Agreement dated as of July 12, 1994 with Intel
Corporation. (9)
10.3(a)+ 1987 Stock Option Plan, and forms of Incentive and Non statutory
Stock Option Agreements, as amended January 18, 1995.
10.4(b)+ 1987 Employee Stock Purchase Plan, and form of Subscription
Agreement, as amended January 18, 1995.
10.6* Technology License and Manufacturing Agreement with Cypress
Semiconductor Corporation, dated June 19, 1987. (1)
10.6(a)* Termination Agreement dated November 23, 1993, regarding
Technology License and Manufacturing Agreement with Cypress
Semiconductor Corporation. (7)
10.8 Product Distribution Agreement with Pioneer-Standard Electronics,
Inc., effective May 30, 1984, as amended. (1)
10.11 Form of Sales Representative Agreement. (1)
10.22* Advanced Micro Devices, formerly MMI, Settlement Agreement
and associated Series E Preferred Stock Purchase Agreement
and Patent License Agreement, all dated March 31, 1987. (1)
10.23 Amended and Restated Lease Agreement with Orchard
Investment Company Number 611, dated November 10, 1989,
for lease of Buildings B and C at 2610 Orchard Parkway,
San Jose, California. (3)
10.24 First Amendment, effective February 5, 1990, to Lease Agreement
with Orchard Investment Company Number 611. (3)
10.25 Product Distribution Agreement with Wyle Electronics Marketing
Group, effective May 16, 1984, as amended. (1)
10.26 Form of Indemnification Agreement entered into with each of the
Company's officers and directors.
10.30* Technology License and Manufacturing Agreement with Texas
Instruments Incorporated, dated July 1, 1988. (2)
10.30(a)* Amendment No. 2 to Technology License and Manufacturing
Agreement with Texas Instruments Incorporated, dated effective
October 1, 1990. (5)
10.31 Product Distribution Agreement with LEX Electronics, Inc.,
formerly Schweber Electronics Corporation effective
December 22, 1988. (2)
</TABLE>

26
<PAGE> 28

<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------

<S> <C>
10.31(a) Consent to Assignment of Product Distribution Agreement,
effective September 23, 1991. (6)
10.33(b)+ 1988 Director Stock Option Plan and forms of Outside Director
Nonstatutory Stock Option Agreement, as amended January 18,
1995.
10.34* Foundry and PROM II.5 Process Technology License Agreement with
Cypress Semiconductor Corporation and Cypress Semiconductor
(Texas) Inc., dated April 24, 1990. (4)
10.34(a)* Amendment Number 1 dated November 23, 1993, regarding Foundry
and PROM II.5 Process Technology License Agreement with Cypress
Semiconductor Corporation and Cypress Semiconductor (Texas)
Inc. (7)
10.35 Master Distribution Agreement with Japan Macnics Corporation
dated June 26, 1986, as amended effective March 18, 1987. (6)
10.37 LSI Products Supply Agreement with Sharp Corporation, dated
October 1, 1993. (7)
10.38+ Altera Corporation Nonqualified Deferred Compensation Plan and
Trust Agreement dated February 1, 1994, and form of Deferred
Compensation Agreement. (7)
11.1 Computation of Earnings per Share.
13.1 Annual Report to Shareholders for the fiscal year ended December
31, 1993 (to be deemed filed only to the extent required by the
instructions to Exhibits for Reports on Form 10-K).
21.1 Subsidiaries of the Registrant.
24.1 Consent of Price Waterhouse LLP (see page 23).
25.1 Power of Attorney (included on pages 24-25).
27 Financial Data Schedule.

</TABLE>
_________
See Pages 21-22 for footnotes.

<PAGE> 1

BYLAWS

ALTERA CORPORATION

REVISED AS OF AUGUST 18, 1994
<PAGE> 2
TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - CORPORATE OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

1.1 PRINCIPAL OFFICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
1.2 OTHER OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

ARTICLE II - MEETINGS OF SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1

2.1 PLACE OF MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.2 ANNUAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
2.3 SPECIAL MEETING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.4 NOTICE OF SHAREHOLDERS' MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.6 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.7 ADJOURNED MEETING; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
2.8 VOTING . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT . . . . . . . . . . . . . . . . . . . . . . . 5
2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . 5
2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS . . . . . . . . . . . . . . . . . . 6
2.12 PROXIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
2.13 INSPECTORS OF ELECTION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

ARTICLE III - DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8

3.1 POWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.2 NUMBER OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 8
3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.4 RESIGNATION AND VACANCIES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
3.6 REGULAR MEETINGS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.7 SPECIAL MEETINGS; NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.8 QUORUM . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 10
3.9 WAIVER OF NOTICE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.10 ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.11 NOTICE OF ADJOURNMENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING . . . . . . . . . . . . . . . . . . . . . . . 11
</TABLE>

-i-
<PAGE> 3
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
3.13 FEES AND COMPENSATION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
3.14 APPROVAL OF LOANS TO OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

ARTICLE IV - COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12

4.1 COMMITTEES OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
4.2 MEETINGS AND ACTION OF COMMITTEES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

ARTICLE V - OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13

5.1 OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
5.2 ELECTION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.3 SUBORDINATE OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.4 REMOVAL AND RESIGNATION OF OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.5 VACANCIES IN OFFICES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.6 CHAIRMAN OF THE BOARD . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 14
5.7 PRESIDENT . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.8 VICE PRESIDENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.9 SECRETARY . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
5.10 CHIEF FINANCIAL OFFICER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

ARTICLE VI - INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.2 INDEMNIFICATION OF OTHERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
6.3 PAYMENT OF EXPENSES IN ADVANCE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.4 INDEMNITY NOT EXCLUSIVE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.5 INSURANCE INDEMNIFICATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
6.6 CONFLICTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17

ARTICLE VII - RECORDS AND REPORTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18

7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.2 MAINTENANCE AND INSPECTION OF BYLAWS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS . . . . . . . . . . . . . . . . . . . . 19
7.4 INSPECTION BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19
</TABLE>

-ii-
<PAGE> 4
TABLE OF CONTENTS
(CONTINUED)
<TABLE>
<CAPTION>
PAGE
----
<S> <C>

7.6 FINANCIAL STATEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 20
7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS . . . . . . . . . . . . . . . . . . . . . . . . 20

ARTICLE VIII - GENERAL MATTERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21

8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING . . . . . . . . . . . . . . . . . . . . 21
8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED . . . . . . . . . . . . . . . . . . . . . . 21
8.4 CERTIFICATES FOR SHARES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
8.5 LOST CERTIFICATES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
8.6 CONSTRUCTION; DEFINITIONS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

ARTICLE IX - AMENDMENTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22

9.1 AMENDMENT BY SHAREHOLDERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
9.2 AMENDMENT BY DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

</TABLE>

-iii-
<PAGE> 5

BYLAWS

ALTERA CORPORATION

ARTICLE I

CORPORATE OFFICES

1.1 PRINCIPAL OFFICE

The board of directors shall fix the location of the principal executive
office of the corporation at any place within or outside the State of
California. If the principal executive office is located outside such state
and the corporation has one or more business offices in such state, then the
board of directors shall fix and designate a principal business office in the
State of California.

1.2 OTHER OFFICES

The board of directors may at any time establish branch or subordinate
offices at any place or places where the corporation is qualified to do
business.

ARTICLE II

MEETINGS OF SHAREHOLDERS

2.1 PLACE OF MEETINGS

Meetings of shareholders shall be held at any place within or outside the
State of California designated by the board of directors. In the absence of
any such designation, shareholders' meetings shall be held at the principal
executive office of the corporation.

2.2 ANNUAL MEETING

The annual meeting of shareholders shall be held each year on a date and at a
time designated by the board of directors. In the absence of such designation,
the annual meeting of shareholders shall be held on the last Wednesday of April
each year at 9:00 a.m. However, if such day falls on a legal holiday, then the
meeting shall be held at the same time and place on the next succeeding full
business day. At the meeting, directors shall be elected, and any other proper
business may be transacted.
<PAGE> 6
2.3 SPECIAL MEETING

A special meeting of the shareholders may be called at any time by the board
of directors, or by the chairman of the board, or by the president, or by one
or more shareholders holding shares in the aggregate entitled to cast not less
than ten percent (10%) of the votes at that meeting.

If a special meeting is called by any person or persons other than the board
of directors or the president or the chairman of the board, then the request
shall be in writing, specifying the time of such meeting and the general nature
of the business proposed to be transacted, and shall be delivered personally or
sent by registered mail or by telegraphic or other facsimile transmission to
the chairman of the board, the president, any vice president or the secretary
of the corporation. The officer receiving the request shall cause notice to be
promptly given to the shareholders entitled to vote, in accordance with the
provisions of Sections 2.4 and 2.5 of these bylaws, that a meeting will be held
at the time requested by the person or persons calling the meeting, so long as
that time is not less than thirty-five (35) nor more than sixty (60) days after
the receipt of the request. If the notice is not given within twenty (20) days
after receipt of the request, then the person or persons requesting the meeting
may give the notice. Nothing contained in this paragraph of this Section 2.3
shall be construed as limiting, fixing or affecting the time when a meeting of
shareholders called by action of the board of directors may be held.

2.4 NOTICE OF SHAREHOLDERS' MEETINGS

All notices of meetings of shareholders shall be sent or otherwise given in
accordance with Section 2.5 of these bylaws not less than ten (10) (or, if sent
by third-class mail pursuant to Section 2.5 of these bylaws, thirty (30)) nor
more than sixty (60) days before the date of the meeting. The notice shall
specify the place, date, and hour of the meeting and (i) in the case of a
special meeting, the general nature of the business to be transacted (no
business other than that specified in the notice may be transacted) or (ii) in
the case of the annual meeting, those matters which the board of directors, at
the time of giving the notice, intends to present for action by the
shareholders (but subject to the provisions of the next paragraph of this
Section 2.4 any proper matter may be presented at the meeting for such action).
The notice of any meeting at which directors are to be elected shall include
the name of any nominee or nominees who, at the time of the notice, the board
intends to present for election.

If action is proposed to be taken at any meeting for approval of (i) a
contract or transaction in which a director has a direct or indirect financial
interest, pursuant to Section 310 of the Corporations Code of California (the
"Code"), (ii) an amendment of the articles of incorporation, pursuant to
Section 902 of the Code, (iii) a reorganization of the corporation, pursuant to
Section 1201 of the Code, (iv) a voluntary dissolution of the corporation,
pursuant to Section 1900 of the Code, or (v) a distribution in dissolution
other than in accordance with the rights of outstanding preferred shares,
pursuant to Section 2007 of the Code, then the notice shall also state the
general nature of that proposal.
<PAGE> 7
2.5 MANNER OF GIVING NOTICE; AFFIDAVIT OF NOTICE

Written notice of any meeting of shareholders shall be given either (i)
personally or (ii) by first-class mail or (iii) by third-class mail but only if
the corporation has outstanding shares held of record by five hundred (500) or
more persons (determined as provided in Section 605 of the Code) on the record
date for the shareholders' meeting, or (iv) by telegraphic or other written
communication. Notices not personally delivered shall be sent charges prepaid
and shall be addressed to the shareholder at the address of that shareholder
appearing on the books of the corporation or given by the shareholder to the
corporation for the purpose of notice. If no such address appears on the
corporation's books or is given, notice shall be deemed to have been given if
sent to that shareholder by mail or telegraphic or other written communication
to the corporation's principal executive office, or if published at least once
in a newspaper of general circulation in the county where that office is
located. Notice shall be deemed to have been given at the time when delivered
personally or deposited in the mail or sent by telegram or other means of
written communication.

If any notice addressed to a shareholder at the address of that shareholder
appearing on the books of the corporation is returned to the corporation by the
United States Postal Service marked to indicate that the United States Postal
Service is unable to deliver the notice to the shareholder at that address,
then all future notices or reports shall be deemed to have been duly given
without further mailing if the same shall be available to the shareholder on
written demand of the shareholder at the principal executive office of the
corporation for a period of one (1) year from the date of the giving of the
notice.

An affidavit of the mailing or other means of giving any notice of any
shareholders' meeting, executed by the secretary, assistant secretary or any
transfer agent of the corporation giving the notice, shall be prima facie
evidence of the giving of such notice.

2.6 QUORUM

The presence in person or by proxy of the holders of a majority of the shares
entitled to vote thereat constitutes a quorum for the transaction of business
at all meetings of shareholders. The shareholders present at a duly called or
held meeting at which a quorum is present may continue to do business until
adjournment, notwithstanding the withdrawal of enough shareholders to leave
less than a quorum, if any action taken (other than adjournment) is approved by
at least a majority of the shares required to constitute a quorum.

2.7 ADJOURNED MEETING; NOTICE

Any shareholders' meeting, annual or special, whether or not a quorum is
present, may be adjourned from time to time by the vote of the majority of the
shares represented at that meeting, either in person or by proxy. In the
absence of a quorum, no other business may be transacted at that meeting except
as provided in Section 2.6 of these bylaws.

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When any meeting of shareholders, either annual or special, is adjourned to
another time or place, notice need not be given of the adjourned meeting if the
time and place are announced at the meeting at which the adjournment is taken.
However, if a new record date for the adjourned meeting is fixed or if the
adjournment is for more than forty-five (45) days from the date set for the
original meeting, then notice of the adjourned meeting shall be given. Notice
of any such adjourned meeting shall be given to each shareholder of record
entitled to vote at the adjourned meeting in accordance with the provisions of
Sections 2.4 and 2.5 of these bylaws. At any adjourned meeting the corporation
may transact any business which might have been transacted at the original
meeting.

2.8 VOTING

The shareholders entitled to vote at any meeting of shareholders shall be
determined in accordance with the provisions of Section 2.11 of these bylaws,
subject to the provisions of Sections 702 through 704 of the Code (relating to
voting shares held by a fiduciary, in the name of a corporation or in joint
ownership).

The shareholders' vote may be by voice vote or by ballot; provided, however,
that any election for directors must be by ballot if demanded by any
shareholder at the meeting and before the voting has begun.

Except as provided in the last paragraph of this Section 2.8, or as may be
otherwise provided in the articles of incorporation, each outstanding share,
regardless of class, shall be entitled to one vote on each matter submitted to
a vote of the shareholders. Any shareholder entitled to vote on any matter may
vote part of the shares in favor of the proposal and refrain from voting the
remaining shares or, except when the matter is the election of directors, may
vote them against the proposal; but, if the shareholder fails to specify the
number of shares which the shareholder is voting affirmatively, it will be
conclusively presumed that the shareholder's approving vote is with respect to
all shares which the shareholder is entitled to vote.

If a quorum is present, the affirmative vote of the majority of the shares
represented and voting at a duly held meeting (which shares voting
affirmatively also constitute at least a majority of the required quorum) shall
be the act of the shareholders, unless the vote of a greater number or a vote
by classes is required by the Code or by the articles of incorporation.

At a shareholders' meeting at which directors are to be elected, a
shareholder shall be entitled, unless otherwise provided in the articles of
incorporation, to cumulate votes (i.e., cast for any candidate a number of
votes greater than the number of votes which such shareholder normally is
entitled to cast) if the candidates' names have been placed in nomination prior
to commencement of the voting and the shareholder has given notice prior to
commencement of the voting of the shareholder's intention to cumulate votes.
If any shareholder has given such a notice, then every shareholder entitled to
vote may cumulate votes for candidates in nomination

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either (i) by giving one candidate a number of votes equal to the number of
directors to be elected multiplied by the number of votes to which that
shareholder's shares are normally entitled or (ii) by distributing the
shareholder's votes on the same principle among any or all of the candidates,
as the shareholder thinks fit. The candidates receiving the highest number of
affirmative votes, up to the number of directors to be elected, shall be
elected; votes against any candidate and votes withheld shall have no legal
effect.

2.9 VALIDATION OF MEETINGS; WAIVER OF NOTICE; CONSENT

The transactions of any meeting of shareholders, either annual or special,
however called and noticed, and wherever held, shall be as valid as though they
had been taken at a meeting duly held after regular call and notice, if a
quorum be present either in person or by proxy, and if, either before or after
the meeting, each person entitled to vote, who was not present in person or by
proxy, signs a written waiver of notice or a consent to the holding of the
meeting or an approval of the minutes thereof. The waiver of notice or consent
or approval need not specify either the business to be transacted or the
purpose of any annual or special meeting of shareholders, except that if action
is taken or proposed to be taken for approval of any of those matters specified
in the second paragraph of Section 2.4 of these bylaws, the waiver of notice or
consent or approval shall state the general nature of the proposal. All such
waivers, consents, and approvals shall be filed with the corporate records or
made a part of the minutes of the meeting.

Attendance by a person at a meeting shall also constitute a waiver of notice
of and presence at that meeting, except when the person objects at the
beginning of the meeting to the transaction of any business because the meeting
is not lawfully called or convened. Attendance at a meeting is not a waiver of
any right to object to the consideration of matters required by the Code to be
included in the notice of the meeting but not so included, if that objection is
expressly made at the meeting.

2.10 SHAREHOLDER ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Any action which may be taken at any annual or special meeting of
shareholders may be taken without a meeting and without prior notice, if a
consent in writing, setting forth the action so taken, is signed by the holders
of outstanding shares having not less than the minimum number of votes that
would be necessary to authorize or take that action at a meeting at which all
shares entitled to vote on that action were present and voted.

In the case of election of directors, such a consent shall be effective only
if signed by the holders of all outstanding shares entitled to vote for the
election of directors. However, a director may be elected at any time to fill
any vacancy on the board of directors, provided that it was not created by
removal of a director and that it has not been filled by the directors, by the
written consent of the holders of a majority of the outstanding shares entitled
to vote for the election of directors.

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All such consents shall be maintained in the corporate records. Any
shareholder giving a written consent, or the shareholder's proxy holders, or a
transferee of the shares, or a personal representative of the shareholder, or
their respective proxy holders, may revoke the consent by a writing received by
the secretary of the corporation before written consents of the number of
shares required to authorize the proposed action have been filed with the
secretary.

If the consents of all shareholders entitled to vote have not been solicited
in writing and if the unanimous written consent of all such shareholders has
not been received, then the secretary shall give prompt notice of the corporate
action approved by the shareholders without a meeting. Such notice shall be
given to those shareholders entitled to vote who have not consented in writing
and shall be given in the manner specified in Section 2.5 of these bylaws. In
the case of approval of (i) a contract or transaction in which a director has a
direct or indirect financial interest, pursuant to Section 310 of the Code,
(ii) indemnification of a corporate "agent," pursuant to Section 317 of the
Code, (iii) a reorganization of the corporation, pursuant to Section 1201 of
the Code, and (iv) a distribution in dissolution other than in accordance with
the rights of outstanding preferred shares, pursuant to Section 2007 of the
Code, the notice shall be given at least ten (10) days before the consummation
of any action authorized by that approval.

2.11 RECORD DATE FOR SHAREHOLDER NOTICE; VOTING; GIVING CONSENTS

For purposes of determining the shareholders entitled to notice of any
meeting or to vote thereat or entitled to give consent to corporate action
without a meeting, the board of directors may fix, in advance, a record date,
which shall not be more than sixty (60) days nor less than ten (10) days before
the date of any such meeting nor more than sixty (60) days before any such
action without a meeting, and in such event only shareholders of record on the
date so fixed are entitled to notice and to vote or to give consents, as the
case may be, notwithstanding any transfer of any shares on the books of the
corporation after the record date, except as otherwise provided in the Code.

If the board of directors does not so fix a record date:

(a) the record date for determining shareholders entitled to notice of or
to vote at a meeting of shareholders shall be at the close of business on the
business day next preceding the day on which notice is given or, if notice is
waived, at the close of business on the business day next preceding the day on
which the meeting is held; and

(b) the record date for determining shareholders entitled to give consent
to corporate action in writing without a meeting, (i) when no prior action by
the board has been taken, shall be the day on which the first written consent
is given, or (ii) when prior action by the board has been taken, shall be at
the close of business on the day on which the board adopts the resolution
relating to that action, or the sixtieth (60th) day before the date of such
other action, whichever is later.

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The record date for any other purpose shall be as provided in Article VIII of
these bylaws.

2.12 PROXIES

Every person entitled to vote for directors, or on any other matter, shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the secretary of the
corporation. A proxy shall be deemed signed if the shareholder's name is
placed on the proxy (whether by manual signature, typewriting, telegraphic
transmission or otherwise) by the shareholder or the shareholder's
attorney-in-fact. A validly executed proxy which does not state that it is
irrevocable shall continue in full force and effect unless (i) the person who
executed the proxy revokes it prior to the time of voting by delivering a
writing to the corporation stating that the proxy is revoked or by executing a
subsequent proxy and presenting it to the meeting or by voting in person at the
meeting, or (ii) written notice of the death or incapacity of the maker of that
proxy is received by the corporation before the vote pursuant to that proxy is
counted; provided, however, that no proxy shall be valid after the expiration
of eleven (11) months from the date of the proxy, unless otherwise provided in
the proxy. The dates contained on the forms of proxy presumptively determine
the order of execution, regardless of the postmark dates on the envelopes in
which they are mailed. The revocability of a proxy that states on its face
that it is irrevocable shall be governed by the provisions of Sections 705(e)
and 705(f) of the Code.

2.13 INSPECTORS OF ELECTION

Before any meeting of shareholders, the board of directors may appoint an
inspector or inspectors of election to act at the meeting or its adjournment.
If no inspector of election is so appointed, then the chairman of the meeting
may, and on the request of any shareholder or a shareholder's proxy shall,
appoint an inspector or inspectors of election to act at the meeting. The
number of inspectors shall be either one (1) or three (3). If inspectors are
appointed at a meeting pursuant to the request of one (1) or more shareholders
or proxies, then the holders of a majority of shares or their proxies present
at the meeting shall determine whether one (1) or three (3) inspectors are to
be appointed. If any person appointed as inspector fails to appear or fails or
refuses to act, then the chairman of the meeting may, and upon the request of
any shareholder or a shareholder's proxy shall, appoint a person to fill that
vacancy.

Such inspectors shall:

(a) determine the number of shares outstanding and the voting power of
each, the number of shares represented at the meeting, the existence of a
quorum, and the authenticity, validity, and effect of proxies;

(b) receive votes, ballots or consents;

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(c) hear and determine all challenges and questions in any way arising in
connection with the right to vote;

(d) count and tabulate all votes or consents;

(e) determine when the polls shall close;

(f) determine the result; and

(g) do any other acts that may be proper to conduct the election or vote
with fairness to all shareholders.

ARTICLE III

DIRECTORS

3.1 POWERS

Subject to the provisions of the Code and any limitations in the articles of
incorporation and these bylaws relating to action required to be approved by
the shareholders or by the outstanding shares, the business and affairs of the
corporation shall be managed and all corporate powers shall be exercised by or
under the direction of the board of directors.

3.2 NUMBER OF DIRECTORS

The number of directors of the corporation shall be not less than four (4)
nor more than seven (7). The exact number of directors shall be five (5) until
changed, within the limits specified above, by a bylaw amending this Section
3.2, duly adopted by the board of directors or by the shareholders. The
indefinite number of directors may be changed, or a definite number may be
fixed without provision for an indefinite number, by a duly adopted amendment
to the articles of incorporation or by an amendment to this bylaw duly adopted
by the vote or written consent of the holders of a majority of the outstanding
shares entitled to vote; provided, however, that an amendment reducing the
fixed number or the minimum number of directors to a number less than five (5)
cannot be adopted if the votes cast against its adoption at a meeting of the
shareholders, or the shares not consenting in the case of action by written
consent, are equal to more than sixteen and two-thirds percent (16 2/3%) of the
outstanding shares entitled to vote thereon. No amendment may change the
stated minimum number of authorized directors to a number greater than two (2)
times the stated minimum number of directors minus one (1).

No reduction of the authorized number of directors shall have the effect of
removing any director before that director's term of office expires.

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3.3 ELECTION AND TERM OF OFFICE OF DIRECTORS

Directors shall be elected at each annual meeting of shareholders to hold
office until the next annual meeting. Each director, including a director
elected to fill a vacancy, shall hold office until the expiration of the term
for which elected and until a successor has been elected and qualified.

3.4 RESIGNATION AND VACANCIES

Any director may resign effective on giving written notice to the chairman of
the board, the president, the secretary or the board of directors, unless the
notice specifies a later time for that resignation to become effective. If the
resignation of a director is effective at a future time, the board of directors
may elect a successor to take office when the resignation becomes effective.

Vacancies in the board of directors may be filled by a majority of the
remaining directors, even if less than a quorum, or by a sole remaining
director; however, a vacancy created by the removal of a director by the vote
or written consent of the shareholders or by court order may be filled only by
the affirmative vote of a majority of the shares represented and voting at a
duly held meeting at which a quorum is present (which shares voting
affirmatively also constitute a majority of the required quorum), or by the
unanimous written consent of all shares entitled to vote thereon. Each
director so elected shall hold office until the next annual meeting of the
shareholders and until a successor has been elected and qualified.

A vacancy or vacancies in the board of directors shall be deemed to exist (i)
in the event of the death, resignation or removal of any director, (ii) if the
board of directors by resolution declares vacant the office of a director who
has been declared of unsound mind by an order of court or convicted of a
felony, (iii) if the authorized number of directors is increased, or (iv) if
the shareholders fail, at any meeting of shareholders at which any director or
directors are elected, to elect the number of directors to be elected at that
meeting.

The shareholders may elect a director or directors at any time to fill any
vacancy or vacancies not filled by the directors, but any such election other
than to fill a vacancy created by removal, if by written consent, shall require
the consent of the holders of a majority of the outstanding shares entitled to
vote thereon.

3.5 PLACE OF MEETINGS; MEETINGS BY TELEPHONE

Regular meetings of the board of directors may be held at any place within or
outside the State of California that has been designated from time to time by
resolution of the board. In the absence of such a designation, regular
meetings shall be held at the principal executive office of the corporation.
Special meetings of the board may be held at any place within or outside the

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State of California that has been designated in the notice of the meeting or,
if not stated in the notice or if there is no notice, at the principal
executive office of the corporation.

Any meeting, regular or special, may be held by conference telephone or
similar communication equipment, so long as all directors participating in the
meeting can hear one another; and all such directors shall be deemed to be
present in person at the meeting.

3.6 REGULAR MEETINGS

Regular meetings of the board of directors may be held without notice if the
times of such meetings are fixed by the board of directors.

3.7 SPECIAL MEETINGS; NOTICE

Special meetings of the board of directors for any purpose or purposes may be
called at any time by the chairman of the board, the president, any vice
president, the secretary or any two directors.

Notice of the time and place of special meetings shall be delivered
personally or by telephone to each director or sent by first-class mail or
telegram, charges prepaid, addressed to each director at that director's
address as it is shown on the records of the corporation. If the notice is
mailed, it shall be deposited in the United States mail at least four (4) days
before the time of the holding of the meeting. If the notice is delivered
personally or by telephone or telegram, it shall be delivered personally or by
telephone or to the telegraph company at least forty-eight (48) hours before
the time of the holding of the meeting. Any oral notice given personally or by
telephone may be communicated either to the director or to a person at the
office of the director who the person giving the notice has reason to believe
will promptly communicate it to the director. The notice need not specify the
purpose or the place of the meeting, if the meeting is to be held at the
principal executive office of the corporation.

3.8 QUORUM

A majority of the authorized number of directors shall constitute a quorum
for the transaction of business, except to adjourn as provided in Section 3.10
of these bylaws. Every act or decision done or made by a majority of the
directors present at a duly held meeting at which a quorum is present shall be
regarded as the act of the board of directors, subject to the provisions of
Section 310 of the Code (as to approval of contracts or transactions in which a
director has a direct or indirect material financial interest), Section 311 of
the Code (as to appointment of committees), Section 317(e) of the Code (as to
indemnification of directors), the articles of incorporation, and other
applicable law.

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A meeting at which a quorum is initially present may continue to transact
business notwithstanding the withdrawal of directors, if any action taken is
approved by at least a majority of the required quorum for that meeting.

3.9 WAIVER OF NOTICE

Notice of a meeting need not be given to any director (i) who signs a waiver
of notice or a consent to holding the meeting or an approval of the minutes
thereof, whether before or after the meeting, or (ii) who attends the meeting
without protesting, prior thereto or at its commencement, the lack of notice to
such directors. All such waivers, consents, and approvals shall be filed with
the corporate records or made part of the minutes of the meeting. A waiver of
notice need not specify the purpose of any regular or special meeting of the
board of directors.

3.10 ADJOURNMENT

A majority of the directors present, whether or not constituting a quorum,
may adjourn any meeting to another time and place.

3.11 NOTICE OF ADJOURNMENT

Notice of the time and place of holding an adjourned meeting need not be
given unless the meeting is adjourned for more than twenty-four (24) hours. If
the meeting is adjourned for more than twenty-four (24) hours, then notice of
the time and place of the adjourned meeting shall be given before the adjourned
meeting takes place, in the manner specified in Section 3.7 of these bylaws, to
the directors who were not present at the time of the adjournment.

3.12 BOARD ACTION BY WRITTEN CONSENT WITHOUT A MEETING

Any action required or permitted to be taken by the board of directors may be
taken without a meeting, provided that all members of the board individually or
collectively consent in writing to that action. Such action by written consent
shall have the same force and effect as a unanimous vote of the board of
directors. Such written consent and any counterparts thereof shall be filed
with the minutes of the proceedings of the board.

3.13 FEES AND COMPENSATION OF DIRECTORS

Directors and members of committees may receive such compensation, if any,
for their services and such reimbursement of expenses as may be fixed or
determined by resolution of the board of directors. This Section 3.13 shall
not be construed to preclude any director from serving the corporation in any
other capacity as an officer, agent, employee or otherwise and receiving
compensation for those services.

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3.14 APPROVAL OF LOANS TO OFFICERS*

The corporation may, upon the approval of the board of directors alone, make
loans of money or property to, or guarantee the obligations of, any officer of
the corporation or its parent or subsidiary, whether or not a director, or
adopt an employee benefit plan or plans authorizing such loans or guaranties
provided that (i) the board of directors determines that such a loan or
guaranty or plan may reasonably be expected to benefit the corporation, (ii)
the corporation has outstanding shares held of record by 100 or more persons
(determined as provided in Section 605 of the Code) on the date of approval by
the board of directors, and (iii) the approval of the board of directors is by
a vote sufficient without counting the vote of any interested director or
directors.

ARTICLE IV

COMMITTEES

4.1 COMMITTEES OF DIRECTORS

The board of directors may, by resolution adopted by a majority of the
authorized number of directors, designate one (1) or more committees, each
consisting of two or more directors, to serve at the pleasure of the board.
The board may designate one (1) or more directors as alternate members of any
committee, who may replace any absent member at any meeting of the committee.
The appointment of members or alternate members of a committee requires the
vote of a majority of the authorized number of directors. Any committee, to
the extent provided in the resolution of the board, shall have all the
authority of the board, except with respect to:

(a) the approval of any action which, under the Code, also requires
shareholders' approval or approval of the outstanding shares;

(b) the filling of vacancies on the board of directors or in any committee;

(d) the amendment or repeal of these bylaws or the adoption of new bylaws;

__________________

* This section is effective only if it has been approved by the shareholders
in accordance with Sections 315(b) and 152 of the Code.

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(e) the amendment or repeal of any resolution of the board of directors
which by its express terms is not so amendable or repealable;

(f) a distribution to the shareholders of the corporation, except at a
rate or in a periodic amount or within a price range determined by the board of
directors; or

(g) the appointment of any other committees of the board of directors or
the members of such committees.

4.2 MEETINGS AND ACTION OF COMMITTEES

Meetings and actions of committees shall be governed by, and held and taken
in accordance with, the provisions of Article III of these bylaws, Section 3.5
(place of meetings), Section 3.6 (regular meetings), Section 3.7 (special
meetings and notice), Section 3.8 (quorum), Section 3.9 (waiver of notice),
Section 3.10 (adjournment), Section 3.11 (notice of adjournment), and Section
3.12 (action without meeting), with such changes in the context of those bylaws
as are necessary to substitute the committee and its members for the board of
directors and its members; provided, however, that the time of regular meetings
of committees may be determined either by resolution of the board of directors
or by resolution of the committee, that special meetings of committees may also
be called by resolution of the board of directors, and that notice of special
meetings of committees shall also be given to all alternate members, who shall
have the right to attend all meetings of the committee. The board of directors
may adopt rules for the government of any committee not inconsistent with the
provisions of these bylaws.

ARTICLE V

OFFICERS

5.1 OFFICERS

The officers of the corporation shall be a president, a secretary, and a
chief financial officer. The corporation may also have, at the discretion of
the board of directors, a chairman of the board, one or more vice presidents,
one or more assistant secretaries, one or more assistant treasurers, and such
other officers as may be appointed in accordance with the provisions of Section
5.3 of these bylaws. Any number of offices may be held by the same person.

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5.2 ELECTION OF OFFICERS

The officers of the corporation except such officers as may be appointed in
accordance with the provisions of Section 5.3 or Section 5.5 of these bylaws,
shall be chosen by the board, subject to the rights, if any, of an officer
under any contract of employment.

5.3 SUBORDINATE OFFICERS

The board of directors may appoint, or may empower the president to appoint,
such other officers as the business of the corporation may require, each of
whom shall hold office for such period, have such authority, and perform such
duties as are provided in these bylaws or as the board of directors may from
time to time determine.

5.4 REMOVAL AND RESIGNATION OF OFFICERS

Subject to the rights, if any, of an officer under any contract of
employment, any officer may be removed, either with or without cause, by the
board of directors at any regular or special meeting of the board or, except in
case of an officer chosen by the board of directors, by any officer upon whom
such power of removal may be conferred by the board of directors.

Any officer may resign at any time by giving written notice to the
corporation. Any resignation shall take effect at the date of the receipt of
that notice or at any later time specified in that notice; and, unless
otherwise specified in that notice, the acceptance of the resignation shall not
be necessary to make it effective. Any resignation is without prejudice to the
rights, if any, of the corporation under any contract to which the officer is a
party.

5.5 VACANCIES IN OFFICES

A vacancy in any office because of death, resignation, removal,
disqualification or any other cause shall be filled in the manner prescribed in
these bylaws for regular appointments to that office.

5.6 CHAIRMAN OF THE BOARD

The chairman of the board, if such an officer be elected, shall, if present,
preside at meetings of the board of directors and exercise and perform such
other powers and duties as may from time to time be assigned to him by the
board of directors or as may be prescribed by these bylaws. If there is no
president, then the chairman of the board shall also be the chief executive
officer of the corporation and shall have the powers and duties prescribed in
Section 5.7 of these bylaws.

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5.7 PRESIDENT

Subject to such supervisory powers, if any, as may be given by the board of
directors to the chairman of the board, if there be such an officer, the
president shall be the chief executive officer of the corporation and shall,
subject to the control of the board of directors, have general supervision,
direction, and control of the business and the officers of the corporation. He
shall preside at all meetings of the shareholders and, in the absence or
nonexistence of a chairman of the board, at all meetings of the board of
directors. He shall have the general powers and duties of management usually
vested in the office of president of a corporation, and shall have such other
powers and duties as may be prescribed by the board of directors or these
bylaws.

5.8 VICE PRESIDENTS

In the absence or disability of the president, the vice presidents, if any,
in order of their rank as fixed by the board of directors or, if not ranked, a
vice president designated by the board of directors, shall perform all the
duties of the president and when so acting shall have all the powers of, and be
subject to all the restrictions upon, the president. The vice presidents shall
have such other powers and perform such other duties as from time to time may
be prescribed for them respectively by the board of directors, these bylaws,
the president or the chairman of the board.

5.9 SECRETARY

The secretary shall keep or cause to be kept, at the principal executive
office of the corporation or such other place as the board of directors may
direct, a book of minutes of all meetings and actions of directors, committees
of directors and shareholders. The minutes shall show the time and place of
each meeting, whether regular or special (and, if special, how authorized and
the notice given), the names of those present at directors' meetings or
committee meetings, the number of shares present or represented at
shareholders' meetings, and the proceedings thereof.

The secretary shall keep, or cause to be kept, at the principal executive
office of the corporation or at the office of the corporation's transfer agent
or registrar, as determined by resolution of the board of directors, a share
register, or a duplicate share register, showing the names of all shareholders
and their addresses, the number and classes of shares held by each, the number
and date of certificates evidencing such shares, and the number and date of
cancellation of every certificate surrendered for cancellation.

The secretary shall give, or cause to be given, notice of all meetings of the
shareholders and of the board of directors required to be given by law or by
these bylaws. He shall keep the seal of the corporation, if one be adopted, in
safe custody and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or by these bylaws.

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5.10 CHIEF FINANCIAL OFFICER

The chief financial officer shall keep and maintain, or cause to be kept and
maintained, adequate and correct books and records of accounts of the
properties and business transactions of the corporation, including accounts of
its assets, liabilities, receipts, disbursements, gains, losses, capital,
retained earnings, and shares. The books of account shall at all reasonable
times be open to inspection by any director.

The chief financial officer shall deposit all money and other valuables in
the name and to the credit of the corporation with such depositaries as may be
designated by the board of directors. He shall disburse the funds of the
corporation as may be ordered by the board of directors, shall render to the
president and directors, whenever they request it, an account of all of his
transactions as chief financial officer and of the financial condition of the
corporation, and shall have such other powers and perform such other duties as
may be prescribed by the board of directors or these bylaws.

ARTICLE VI

INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES,
AND OTHER AGENTS

6.1 INDEMNIFICATION OF DIRECTORS AND OFFICERS

The corporation shall, to the maximum extent and in the manner permitted by
the Code, indemnify each of its directors and officers against expenses (as
defined in Section 317(a) of the Code), judgments, fines, settlements, and
other amounts actually and reasonably incurred in connection with any
proceeding (as defined in Section 317(a) of the Code), arising by reason of the
fact that such person is or was an agent of the corporation. For purposes of
this Article VI, a "director" or "officer" of the corporation includes any
person (i) who is or was a director or officer of the corporation, (ii) who is
or was serving at the request of the corporation as a director or officer of
another corporation, partnership, joint venture, trust or other enterprise, or
(iii) who was a director or officer of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.

6.2 INDEMNIFICATION OF OTHERS

The corporation shall have the power, to the extent and in the manner
permitted by the Code, to indemnify each of its employees and agents (other
than directors and officers) against expenses (as defined in Section 317(a) of
the Code), judgments, fines, settlements, and other amounts actually and
reasonably incurred in connection with any proceeding (as defined in Section
317(a) of the Code), arising by reason of the fact that such person is or was
an agent of

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<PAGE> 21
the corporation. For purposes of this Article VI, an "employee" or "agent" of
the corporation (other than a director or officer) includes any person (i) who
is or was an employee or agent of the corporation, (ii) who is or was serving
at the request of the corporation as an employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, or (iii)
who was an employee or agent of a corporation which was a predecessor
corporation of the corporation or of another enterprise at the request of such
predecessor corporation.

6.3 PAYMENT OF EXPENSES IN ADVANCE

Expenses incurred in defending any civil or criminal action or proceeding for
which indemnification is required pursuant to Section 6.1 or for which
indemnification is permitted pursuant to Section 6.2 following authorization
thereof by the Board of Directors shall be paid by the corporation in advance
of the final disposition of such action or proceeding upon receipt of an
undertaking by or on behalf of the indemnified party to repay such amount if it
shall ultimately be determined that the indemnified party is not entitled to be
indemnified as authorized in this Article VI.

6.4 INDEMNITY NOT EXCLUSIVE

The indemnification provided by this Article VI shall not be deemed exclusive
of any other rights to which those seeking indemnification may be entitled
under any bylaw, agreement, vote of shareholders or disinterested directors or
otherwise, both as to action in an official capacity and as to action in
another capacity while holding such office, to the extent that such additional
rights to indemnification are authorized in the Articles of Incorporation.

6.5 INSURANCE INDEMNIFICATION

The corporation shall have the power to purchase and maintain insurance on
behalf of any person who is or was a director, officer, employee or agent of
the corporation against any liability asserted against or incurred by such
person in such capacity or arising out of such person's status as such, whether
or not the corporation would have the power to indemnify him against such
liability under the provisions of this Article VI.

6.6 CONFLICTS

No indemnification or advance shall be made under this Article VI, except
where such indemnification or advance is mandated by law or the order, judgment
or decree of any court of competent jurisdiction, in any circumstance where it
appears:

(a) That it would be inconsistent with a provision of the Articles of
Incorporation, these bylaws, a resolution of the shareholders or an agreement
in effect at the time of the accrual of the alleged cause of the action
asserted in the proceeding in which the expenses were incurred or other amounts
were paid, which prohibits or otherwise limits indemnification; or

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(b) That it would be inconsistent with any condition expressly imposed by a
court in approving a settlement.

ARTICLE VII

RECORDS AND REPORTS

7.1 MAINTENANCE AND INSPECTION OF SHARE REGISTER

The corporation shall keep either at its principal executive office or at the
office of its transfer agent or registrar (if either be appointed), as
determined by resolution of the board of directors, a record of its
shareholders listing the names and addresses of all shareholders and the number
and class of shares held by each shareholder.

A shareholder or shareholders of the corporation who holds at least five
percent (5%) in the aggregate of the outstanding voting shares of the
corporation or who holds at least one percent (1%) of such voting shares and
has filed a Schedule 14B with the Securities and Exchange Commission relating
to the election of directors, may (i) inspect and copy the records of
shareholders' names, addresses, and shareholdings during usual business hours
on five (5) days' prior written demand on the corporation, (ii) obtain from the
transfer agent of the corporation, on written demand and on the tender of such
transfer agent's usual charges for such list, a list of the names and addresses
of the shareholders who are entitled to vote for the election of directors, and
their shareholdings, as of the most recent record date for which that list has
been compiled or as of a date specified by the shareholder after the date of
demand. Such list shall be made available to any such shareholder by the
transfer agent on or before the later of five (5) days after the demand is
received or five (5) days after the date specified in the demand as the date as
of which the list is to be compiled.

The record of shareholders shall also be open to inspection on the written
demand of any shareholder or holder of a voting trust certificate, at any time
during usual business hours, for a purpose reasonably related to the holder's
interests as a shareholder or as the holder of a voting trust certificate.

Any inspection and copying under this Section 7.1 may be made in person or by
an agent or attorney of the shareholder or holder of a voting trust certificate
making the demand.

7.2 MAINTENANCE AND INSPECTION OF BYLAWS

The corporation shall keep at its principal executive office or, if its
principal executive office is not in the State of California, at its principal
business office in California the original or a copy of these bylaws as amended
to date, which bylaws shall be open to inspection by the

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<PAGE> 23
shareholders at all reasonable times during office hours. If the principal
executive office of the corporation is outside the State of California and the
corporation has no principal business office in such state, then the secretary
shall, upon the written request of any shareholder, furnish to that shareholder
a copy of these bylaws as amended to date.

7.3 MAINTENANCE AND INSPECTION OF OTHER CORPORATE RECORDS

The accounting books and records and the minutes of proceedings of the
shareholders, of the board of directors, and of any committee or committees of
the board of directors shall be kept at such place or places as are designated
by the board of directors or, in absence of such designation, at the principal
executive office of the corporation. The minutes shall be kept in written
form, and the accounting books and records shall be kept either in written form
or in any other form capable of being converted into written form.

The minutes and accounting books and records shall be open to inspection upon
the written demand of any shareholder or holder of a voting trust certificate,
at any reasonable time during usual business hours, for a purpose reasonably
related to the holder's interests as a shareholder or as the holder of a voting
trust certificate. The inspection may be made in person or by an agent or
attorney and shall include the right to copy and make extracts. Such rights of
inspection shall extend to the records of each subsidiary corporation of the
corporation.

7.4 INSPECTION BY DIRECTORS

Every director shall have the absolute right at any reasonable time to
inspect all books, records, and documents of every kind as well as the physical
properties of the corporation and each of its subsidiary corporations. Such
inspection by a director may be made in person or by an agent or attorney. The
right of inspection includes the right to copy and make extracts of documents.

7.5 ANNUAL REPORT TO SHAREHOLDERS; WAIVER

The board of directors shall cause an annual report to be sent to the
shareholders not later than one hundred twenty (120) days after the close of
the fiscal year adopted by the corporation. Such report shall be sent at least
fifteen (15) days (or, if sent by third-class mail, thirty-five (35) days)
before the annual meeting of shareholders to be held during the next fiscal
year and in the manner specified in Section 2.5 of these bylaws for giving
notice to shareholders of the corporation.

The annual report shall contain (i) a balance sheet as of the end of the
fiscal year, (ii) an income statement, (iii) a statement of changes in
financial position for the fiscal year, and (iv) any report of independent
accountants or, if there is no such report, the certificate of an authorized
officer of the corporation that the statements were prepared without audit from
the books and records of the corporation.

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<PAGE> 24
The foregoing requirement of an annual report shall be waived so long as the
shares of the corporation are held by fewer than one hundred (100) holders of
record.

7.6 FINANCIAL STATEMENTS

If no annual report for the fiscal year has been sent to shareholders, then
the corporation shall, upon the written request of any shareholder made more
than one hundred twenty (120) days after the close of such fiscal year, deliver
or mail to the person making the request, within thirty (30) days thereafter, a
copy of a balance sheet as of the end of such fiscal year and an income
statement and statement of changes in financial position for such fiscal year.

If a shareholder or shareholders holding at least five percent (5%) of the
outstanding shares of any class of stock of the corporation makes a written
request to the corporation for an income statement of the corporation for the
three-month, six-month or nine-month period of the then current fiscal year
ended more than thirty (30) days before the date of the request, and for a
balance sheet of the corporation as of the end of that period, then the chief
financial officer shall cause that statement to be prepared, if not already
prepared, and shall deliver personally or mail that statement or statements to
the person making the request within thirty (30) days after the receipt of the
request. If the corporation has not sent to the shareholders its annual report
for the last fiscal year, the statements referred to in the first paragraph of
this Section 7.6 shall likewise be delivered or mailed to the shareholder or
shareholders within thirty (30) days after the request.

The quarterly income statements and balance sheets referred to in this
section shall be accompanied by the report, if any, of any independent
accountants engaged by the corporation or by the certificate of an authorized
officer of the corporation that the financial statements were prepared without
audit from the books and records of the corporation.

7.7 REPRESENTATION OF SHARES OF OTHER CORPORATIONS

The chairman of the board, the president, any vice president, the chief
financial officer, the secretary or assistant secretary of this corporation, or
any other person authorized by the board of directors or the president or a
vice president, is authorized to vote, represent, and exercise on behalf of
this corporation all rights incident to any and all shares of any other
corporation or corporations standing in the name of this corporation. The
authority herein granted may be exercised either by such person directly or by
any other person authorized to do so by proxy or power of attorney duly
executed by such person having the authority.

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<PAGE> 25
ARTICLE VIII

GENERAL MATTERS

8.1 RECORD DATE FOR PURPOSES OTHER THAN NOTICE AND VOTING

For purposes of determining the shareholders entitled to receive payment of
any dividend or other distribution or allotment of any rights or the
shareholders entitled to exercise any rights in respect of any other lawful
action (other than action by shareholders by written consent without a
meeting), the board of directors may fix, in advance, a record date, which
shall not be more than sixty (60) days before any such action. In that case,
only shareholders of record at the close of business on the date so fixed are
entitled to receive the dividend, distribution or allotment of rights, or to
exercise such rights, as the case may be, notwithstanding any transfer of any
shares on the books of the corporation after the record date so fixed, except
as otherwise provided in the Code.

If the board of directors does not so fix a record date, then the record date
for determining shareholders for any such purpose shall be at the close of
business on the day on which the board adopts the applicable resolution or the
sixtieth (60th) day before the date of that action, whichever is later.

8.2 CHECKS; DRAFTS; EVIDENCES OF INDEBTEDNESS

From time to time, the board of directors shall determine by resolution which
person or persons may sign or endorse all checks, drafts, other orders for
payment of money, notes or other evidences of indebtedness that are issued in
the name of or payable to the corporation, and only the persons so authorized
shall sign or endorse those instruments.

8.3 CORPORATE CONTRACTS AND INSTRUMENTS: HOW EXECUTED

The board of directors, except as otherwise provided in these bylaws, may
authorize any officer or officers, or agent or agents, to enter into any
contract or execute any instrument in the name of and on behalf of the
corporation; such authority may be general or confined to specific instances.
Unless so authorized or ratified by the board of directors or within the agency
power of an officer, no officer, agent or employee shall have any power or
authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable for any purpose or for any amount.

8.4 CERTIFICATES FOR SHARES

A certificate or certificates for shares of the corporation shall be issued
to each shareholder when any of such shares are fully paid. The board of
directors may authorize the

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<PAGE> 26
issuance of certificates for shares partly paid provided that these
certificates shall state the total amount of the consideration to be paid for
them and the amount actually paid. All certificates shall be signed in the
name of the corporation by the chairman of the board or the vice chairman of
the board or the president or a vice president and by the chief financial
officer or an assistant treasurer or the secretary or an assistant secretary,
certifying the number of shares and the class or series of shares owned by the
shareholder. Any or all of the signatures on the certificate may be facsimile.

In case any officer, transfer agent or registrar who has signed or whose
facsimile signature has been placed on a certificate ceases to be that officer,
transfer agent or registrar before that certificate is issued, it may be issued
by the corporation with the same effect as if that person were an officer,
transfer agent or registrar at the date of issue.

8.5 LOST CERTIFICATES

Except as provided in this Section 8.5, no new certificates for shares shall
be issued to replace a previously issued certificate unless the latter is
surrendered to the corporation and cancelled at the same time. The board of
directors may, in case any share certificate or certificate for any other
security is lost, stolen or destroyed, authorize the issuance of replacement
certificates on such terms and conditions as the board may require; the board
may require indemnification of the corporation secured by a bond or other
adequate security sufficient to protect the corporation against any claim that
may be made against it, including any expense or liability, on account of the
alleged loss, theft or destruction of the certificate or the issuance of the
replacement certificate.

8.6 CONSTRUCTION; DEFINITIONS

Unless the context requires otherwise, the general provisions, rules of
construction, and definitions in the Code shall govern the construction of
these bylaws. Without limiting the generality of this provision, the singular
number includes the plural, the plural number includes the singular, and the
term "person" includes both a corporation and a natural person.

ARTICLE IX

AMENDMENTS

9.1 AMENDMENT BY SHAREHOLDERS

New bylaws may be adopted or these bylaws may be amended or repealed by the
vote or written consent of holders of a majority of the outstanding shares
entitled to vote; provided, however, that if the articles of incorporation of
the corporation set forth the number of

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authorized directors of the corporation, then the authorized number of
directors may be changed only by an amendment of the articles of incorporation.

9.2 AMENDMENT BY DIRECTORS

Subject to the rights of the shareholders as provided in Section 9.1 of these
bylaws, bylaws, other than a bylaw or an amendment of a bylaw changing the
authorized number of directors (except to fix the authorized number of
directors pursuant to a bylaw providing for a variable number of directors),
may be adopted, amended or repealed by the board of directors.

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<PAGE> 1

ALTERA CORPORATION

1987 STOCK OPTION PLAN

(As amended effective January 18, 1995)

1. Purposes of the Plan. The purposes of this Stock Option Plan are to
attract and retain the best available personnel for positions of substantial
responsibility, to provide additional incentive to the Employees and Consultants
of the Company and to promote the success of the Company's business.

Options granted hereunder may be either Incentive Stock Options or
Nonstatutory Stock Options, at the discretion of the Board and as reflected in
the terms of the written option agreement.

2. Definitions. As used herein, the following definitions shall apply:

(a) "Board" shall mean the Committee, if one has been appointed, or
the Board of Directors of the Company, if no Committee is appointed.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(c) "Committee" shall mean the Committee appointed by the Board of
Directors in accordance with paragraph (a) of Section 4 of the Plan, if one
is appointed.

(d) "Common Stock" shall mean the Common Stock of the Company.

(e) "Company" shall mean Altera Corporation, a California corporation.

(f) "Consultant" shall mean any person who is engaged by the Company
or any Parent or Subsidiary to render consulting services and is
compensated for such consulting services, and any Director of the Company
whether compensated for such services or not; provided that if and in the
event the Company registers any class of any equity security pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the term Consultant shall thereafter not include Directors
who are not compensated for their services or are paid only a Director's
fee by the Company.

(g) "Continuous Status as an Employee or Consultant" shall mean the
absence of any interruption or termination of service as an Employee or
Consultant. Continuous Status as an Employee or Consultant shall not be
considered interrupted in the case of sick leave, military leave, or any
other leave of absence approved by the Board (or the Committee or any other
committee of the Board); provided that, for purposes of Incentive Stock
Options, such leave is for a period of not more than 90 days or
reemployment upon the expiration of such leave is guaranteed by contract
(including certain Company policies) or statute.

(h) "Director" means a member of the Board.
<PAGE> 2

(i) "Employee" shall mean any person, including Officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient to constitute "employment" by the Company.

(j) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.

(k) "Incentive Stock Option" shall mean an Option intended to qualify
as an incentive stock option within the meaning of Section 422 of the Code.

(l) "Nonstatutory Stock Option" shall mean an Option not intended to
qualify as an Incentive Stock Option.

(m) "Officer" means a person who is an officer of the Company within
the meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.

(n) "Option" shall mean a stock option granted pursuant to the Plan.

(o) "Optioned Stock" shall mean the Common Stock subject to an Option.

(p) "Optionee" shall mean an Employee or Consultant who receives an
Option.

(q) "Parent" shall mean a "parent corporation," whether now or
hereafter existing, as defined in Section 424(e) of the Code.

(r) "Plan" shall mean this 1987 Stock Option Plan.

(s) "Rule 16b-3" means Rule 16b-3 of the Exchange Act, or any
successor to Rule 16b-3, as in effect when discretion is being exercised
with respect to the Plan.

(t) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

(u) "Subsidiary" shall mean a "subsidiary corporation," whether now or
hereafter existing, as defined in Section 424(f) of the Code.

3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of shares which may be optioned and sold
under the Plan is 4,050,000 shares of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have

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<PAGE> 3

been terminated, become available for future grant under the Plan.
Notwithstanding any other provision of the Plan, shares issued under the Plan
and later repurchased by the Company shall not become available for future grant
or sale under the Plan.

4. Administration of the Plan.

(a) Procedure.

(i) Multiple Administrative Bodies. If permitted by Rule 16b-3,
the Plan may be administered by a Committee appointed by the Board,
which may consist of members of the Board of Directors and/or employees
of the Company, provided that any such Committee containing non-
Directors shall only be authorized to grant options and take other
actions with respect to persons who are not directors or officers of the
Company subject to Section 16 of the Exchange Act.

(ii) Administration With Respect to Directors and Officers Subject
to Section 16(b). With respect to Option grants made to Employees who
are also Officers or Directors subject to Section 16(b) of the Exchange
Act, the Plan shall be administered by (A) the Board, if the Board may
administer the Plan in compliance with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3, or (B) a
Committee designated by the Board to administer the Plan, which
Committee shall be constituted to comply with the rules governing a plan
intended to qualify as a discretionary plan under Rule 16b-3. Once
appointed, such Committee shall continue to serve in its designated
capacity until otherwise directed by the Board. From time to time the
Board may increase the size of the Committee and appoint additional
members, remove members (with or without cause) and substitute new
members, fill vacancies (however caused), and remove all members of the
Committee and thereafter directly administer the Plan, all to the extent
permitted by the rules governing a plan intended to qualify as a
discretionary plan under Rule 16b-3.

(iii) Administration With Respect to Other Persons. With respect
to Option grants made to Employees or Consultants who are neither
Directors nor Officers of the Company, the Plan shall be administered by
(A) the Board or (B) a Committee designated by the Board, which
Committee shall be constituted to satisfy applicable laws. Once
appointed, such Committee shall serve in its designated capacity until
otherwise directed by the Board. The Board may increase the size of the
Committee and appoint additional members, remove members (with or
without cause) and substitute new members, fill vacancies (however
caused), and remove all members of the Committee and thereafter directly
administer the Plan, all to the extent permitted by applicable laws.

(b) Powers of the Board. Subject to the provisions of the Plan, the
Board shall have the authority, in its discretion: (i) to grant Incentive
Stock Options or Nonstatutory Stock Options; (ii) to determine, upon review
of relevant information and in accordance with Section 8(b) of the Plan,
the fair market value of the Common Stock; (iii) to determine the exercise
price per share of Options to be granted, which exercise price shall be
determined in accordance with Section 8(a) of the Plan; (iv) to determine
the Employees or Consultants to whom, and the time or times at which,
Options shall be

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<PAGE> 4

granted and the number of shares to be represented by each Option; (v) to
interpret the Plan; (vi) to prescribe, amend and rescind rules and
regulations relating to the Plan; (vii) to determine the terms and
provisions of each Option granted (which need not be identical) and, with
the consent of the holder thereof, modify or amend each Option; (viii) to
accelerate or defer (with the consent of the Optionee) the exercise date of
any Option, consistent with the provisions of Section 5 of the Plan; (ix)
to authorize any person to execute on behalf of the Company any instrument
required to effectuate the grant of an Option previously granted by the
Board; and (x) to make all other determinations deemed necessary or
advisable for the administration of the Plan.

(c) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.

5. Eligibility.

(a) Nonstatutory Stock Options may be granted only to Employees and
Consultants. Incentive Stock Options may be granted only to Employees. An
Employee or Consultant who has been granted an Option may, if he is
otherwise eligible, be granted an additional Option or Options.

(b) No Incentive Stock Option may be granted to an Employee which,
when aggregated with all other incentive stock options granted to such
Employee by the Company or any Parent or Subsidiary, would result in Shares
having an aggregate fair market value (determined for each Share as of the
date of grant of the Option covering such Share) in excess of $100,000
becoming first available for purchase upon exercise of one or more
incentive stock options during any calendar year.

(c) Section 5(b) of the Plan shall apply only to an Incentive Stock
Option evidenced by an "Incentive Stock Option Agreement" which sets forth
the intention of the Company and the Optionee that such Option shall
qualify as an incentive stock option. Section 5(b) of the Plan shall not
apply to any Option evidenced by a "Nonstatutory Stock Option Agreement"
which sets forth the intention of the Company and the Optionee that such
Option shall be a Nonstatutory Stock Option.

(d) The Plan shall not confer upon any Optionee any right with respect
to continuation of employment or consulting relationship with the Company,
nor shall it interfere in any way with his right or the Company's right to
terminate his employment or consulting relationship at any time.

(e) The following limitations shall apply to grants of Options to
Employees:

(i) No Employee shall be granted, in any fiscal year of the
Company, Options to purchase more than 250,000 shares.

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<PAGE> 5

(ii) In connection with his or her initial employment, an Employee
may be granted Options to purchase up to an additional 250,000 Shares
which shall not count against the limit set forth in subsection (i)
above.

(iii) The foregoing limitations shall be adjusted proportionately
in connection with any change in the Company's capitalization as
described in Section 11.

(iv) If an Option is cancelled in the same fiscal year of the
Company in which it was granted (other than in connection with a
transaction described in Section 11), the cancelled Option will be
counted against the limit set forth in Section 5(e)(i). For this
purpose, if the exercise price of an Option is reduced, the transaction
will be treated as a cancellation of the Option and the grant of a new
Option.

6. Term of Plan. The Plan shall become effective upon the earlier to occur
of its adoption by the Board of Directors or its approval by the shareholders of
the Company as described in Section 17 of the Plan. It shall continue in effect
for a term of ten (10) years unless sooner terminated under Section 13 of the
Plan.

7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof or such shorter term as may be provided in the Option
Agreement. However, in the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option shall be five (5)
years from the date of grant thereof or such shorter term as may be provided in
the Incentive Stock Option Agreement.

8. Exercise Price and Consideration.

(a) The per Share exercise price for the Shares to be issued pursuant
to exercise of an Option shall be such price as is determined by the Board,
but shall be subject to the following:

(i) In the case of an Incentive Stock Option

(A) granted to an Employee who, at the time of the grant of such
Incentive Stock Option, owns stock representing more than ten percent
(10%) of the voting power of all classes of stock of the Company or
any Parent or Subsidiary, the per Share exercise price shall be no
less than 110% of the fair market value per Share on the date of
grant.

(B) granted to any Employee, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date
of grant.

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<PAGE> 6

(ii) In the case of a Nonstatutory Stock Option

(A) granted to a person who, at the time of the grant of such
Option, owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any Parent or
Subsidiary, the per Share exercise price shall be no less than 110%
of the fair market value per Share on the date of the grant.

(B) granted to any person, the per Share exercise price shall be
no less than 85% of the fair market value per Share on the date of
grant.

(iii) In the case of an Option granted on or after the effective
date of registration of any class of equity security of the Company
pursuant to Section 12 of the Exchange Act and prior to six months after
the termination of such registration, the per Share exercise price shall
be no less than 100% of the fair market value per Share on the date of
grant.

(b) The fair market value shall be determined by the Board in its
discretion; provided, however, that where there is a public market for the
Common Stock, the fair market value per Share shall be the mean of the bid
and asked prices (or the closing price per share if the Common Stock is
listed on the National Association of Securities Dealers Automated
Quotation ("NASDAQ") National Market System) of the Common Stock for the
date of grant, as reported in the Wall Street Journal (or, if not so
reported, as otherwise reported by the NASDAQ System) or, in the event the
Common Stock is listed on a stock exchange, the fair market value per Share
shall be the closing price on such exchange on the date of grant of the
Option, as reported in the Wall Street Journal.

(c) The consideration to be paid for the Shares to be issued upon
exercise of an Option, including the method of payment, shall be determined
by the Board and may consist entirely of cash, check, promissory note,
other Shares of Common Stock having a fair market value on the date of
surrender equal to the aggregate exercise price of the Shares as to which
said Option shall be exercised, or any combination of such methods of
payment, or such other consideration and method of payment for the issuance
of Shares to the extent permitted under Sections 408 and 409 of the
California General Corporation Law. In making its determination as to the
type of consideration to accept, the Board shall consider if acceptance of
such consideration may be reasonably expected to benefit the Company
(Section 315(b) of the California General Corporation Law).

9. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times and under such
conditions as determined by the Board, including performance criteria with
respect to the Company and/or the Optionee, and as shall be permissible
under the terms of the Plan; provided, however, that an Incentive Stock
Option granted prior to January 1, 1987 (the "Sequential Option") shall not
be exercisable while there is outstanding any Incentive Stock Option which
was granted, before the granting of the Sequential Option, to the same
Optionee to purchase stock

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<PAGE> 7

of the Company, any Parent or Subsidiary, or any predecessor corporation of
such corporations. For purposes of this provision, an Incentive Stock
Option shall be treated as outstanding until such option is exercised in
full or expires by reason of lapse of time.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may, as authorized by the Board, consist of
any consideration and method of payment allowable under Section 8(c) of the
Plan. Until the issuance (as evidenced by the appropriate entry on the
books of the Company or of a duly authorized transfer agent of the Company)
of the stock certificate evidencing such Shares, no right to vote or
receive dividends or any other rights as a shareholder shall exist with
respect to the Optioned Stock, notwithstanding the exercise of the Option.
The Company shall issue (or cause to be issued) such stock certificate
promptly upon exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.

Exercise of an Option in any manner shall result in a decrease in the
number of Shares which thereafter may be available, both for purposes of
the Plan and for sale under the Option, by the number of Shares as to which
the Option is exercised.

(b) Termination of Status as an Employee or Consultant. In the event
of termination of an Optionee's Continuous Status as an Employee or
Consultant (as the case may be), such Optionee may, but only within thirty
(30) days (or such other period of time, not exceeding three (3) months in
the case of an Incentive Stock Option or six (6) months in the case of a
Nonstatutory Stock Option, as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the date of such termination (but in no
event later than the date of expiration of the term of such Option as set
forth in the Option Agreement), exercise his Option to the extent that he
was entitled to exercise it at the date of such termination. To the extent
that he was not entitled to exercise the Option at the date of such
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.

(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event of termination of an Optionee's Continuous Status
as an Employee or Consultant as a result of his total and permanent
disability (as defined in Section 22(e)(3) of the Code), he may, but only
within three (3) months (or such other period of time not exceeding twelve
(12) months as is determined by the Board, with such determination in the
case of an Incentive Stock Option being made at the time of grant of the
Option) from the date of such termination (but in no event later than the
date of expiration of the term of such Option as set forth in the Option
Agreement), exercise his Option to the extent he was entitled to exercise
it at the date of such termination. To the extent that he was not entitled
to

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<PAGE> 8

exercise the Option at the date of termination, or if he does not exercise
such Option (which he was entitled to exercise) within the time specified
herein, the Option shall terminate.

(d) Death of Optionee. In the event of the death of an Optionee:

(i) during the term of the Option who is at the time of his death
an Employee or Consultant of the Company and who shall have been in
Continuous Status as an Employee or Consultant since the date of grant
of the Option, the Option may be exercised, at any time within six (6)
months following the date of death (but in no event later than the date
of expiration of the term of such Option as set forth in the Option
Agreement), by the Optionee's estate or by a person who acquired the
right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had the Optionee
continued living and remained in Continuous Status as an Employee or
Consultant six (6) months after the date of death, subject to the
limitation set forth in Section 5(b); or

(ii) within thirty (30) days (or such other period of time not
exceeding three (3) months as is determined by the Board, with such
determination in the case of an Incentive Stock Option being made at the
time of grant of the Option) after the termination of Continuous Status
as an Employee or Consultant, the Option may be exercised, at any time
within six (6) months following the date of death (but in no event later
than the date of expiration of the term of such Option as set forth in
the Option Agreement), by the Optionee's estate or by a person who
acquired the right to exercise the Option by bequest or inheritance, but
only to the extent of the right to exercise that had accrued at the date
of termination.

10. Non-Transferability of Options. Options may not be sold, pledged,
assigned, hypothecated, transferred or disposed of in any manner other than by
will or by the laws of descent and distribution or pursuant to a qualified
domestic relations order as defined by the Code or Title I of the Employee
Retirement Income Security Act, or the rules thereunder. The designation of a
beneficiary by an Optionee does not constitute a transfer. An Option may be
exercised, during the lifetime of the Optionee, only by the Optionee or a
transferee permitted by this Section 10.

11. Adjustments Upon Changes in Capitalization or Merger. Subject to any
required action by the shareholders of the Company, the number of shares of
Common Stock covered by each outstanding Option, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options have yet been granted or which have been returned to the Plan
upon cancellation or expiration of an Option, as well as the price per share of
Common Stock covered by each such outstanding Option, shall be proportionately
adjusted for any increase or decrease in the number of issued shares of Common
Stock resulting from a stock split, reverse stock split, stock dividend,
combination or reclassification of the Common Stock, or any other increase or
decrease in the number of issued shares of Common Stock effected without receipt
of consideration by the Company; provided, however, that conversion of any
convertible securities of the Company shall not be deemed to have been "effected
without receipt of consideration." Such adjustment shall be made by the Board,

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<PAGE> 9

whose determination in that respect shall be final, binding and conclusive.
Except as expressly provided herein, no issuance by the Company of shares of
stock of any class, or securities convertible into shares of stock of any class,
shall affect, and no adjustment by reason thereof shall be made with respect to,
the number or price of shares of Common Stock subject to an Option.

In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If,
however, such successor corporation does not agree to fully assume such options,
the Board shall act to fully accelerate the vesting of all of the shares subject
to each outstanding Option such that the Optionee shall have the right to
exercise the Option as to all of the Optioned Stock, including Shares as to
which the Option would not otherwise be exercisable. If the Board makes an
Option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the Optionee that the Option
shall be fully exercisable for a period of thirty (30) days from the date of
such notice, and the Option will terminate upon the expiration of such period.

12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date on which the Board makes the determination granting
such Option. Notice of the determination shall be given to each Employee or
Consultant to whom an Option is so granted within a reasonable time after the
date of such grant.

13. Amendment and Termination of the Plan.

(a) Amendment and Termination. The Board may amend or terminate the
Plan from time to time in such respects as the Board may deem advisable;
provided that, the following revisions or amendments shall require approval
of the shareholders of the Company in the manner described in Section 17 of
the Plan:

(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan;

(ii) any change in the designation of the class of persons eligible
to be granted Options; or

(iii) if the Company has a class of equity securities registered
under Section 12 of the Exchange Act at the time of such revision or
amendment, any material increase in the benefits accruing to
participants under the Plan.

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<PAGE> 10

(b) Shareholder Approval. If any amendment requiring shareholder
approval under Section 13(a) of the Plan is made subsequent to the first
registration of any class of equity securities by the Company under Section
12 of the Exchange Act, such shareholder approval shall be solicited as
described in Section 17 of the Plan.

(c) Effect of Amendment or Termination. Any such amendment or
termination of the Plan shall not affect Options already granted and such
Options shall remain in full force and effect as if this Plan had not been
amended or terminated, unless mutually agreed otherwise between the
Optionee and the Board, which agreement must be in writing and signed by
the Optionee and the Company.

14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, and the requirements of any stock exchange upon which the Shares may
then be listed, and shall be further subject to the approval of counsel for the
Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

15. Reservation of Shares. The Company, during the term of this Plan, will
at all times reserve and keep available such number of Shares as shall be
sufficient to satisfy the requirements of the Plan.

The inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

17. Shareholder Approval.

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<PAGE> 11

obtained by written consent, it must be obtained by the unanimous written
consent of all shareholders of the Company; provided, however, that
approval at a meeting or by written consent may be obtained by a lesser
degree of shareholder approval if the Board determines, in its discretion
after consultation with the Company's legal counsel, that such a lesser
degree of shareholder approval will comply with all applicable laws and
will not adversely affect the qualification of the Plan under Section 422A
of the Code.

(b) If and in the event that the Company registers any class of equity
securities pursuant to Section 12 of the Exchange Act, any required
approval of the shareholders of the Company obtained after such
registration shall be solicited substantially in accordance with Section
14(a) of the Exchange Act and the rules and regulations promulgated
thereunder.

(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the
manner described in Section 17(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the
later of (1) the first registration of any class of equity securities of
the Company under Section 12 of the Exchange Act or (2) the granting of an
Option hereunder to an officer or director after such registration, do the
following:

(i) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies
to be voted with respect to approval or disapproval of the Plan or
amendment were then being solicited) by the rules and regulations in
effect under Section 14(a) of the Exchange Act at the time such
information is furnished; and

(ii) file with, or mail for filing to, the Securities and Exchange
Commission four copies of the written information referred to in
subsection (i) hereof not later than the date on which such information
is first sent or given to shareholders.

18. Information to Optionees. The Company shall provide to each Optionee,
during the period for which such Optionee has one or more Options outstanding,
copies of all annual reports and other information which are provided to all
shareholders of the Company. The Company shall not be required to provide such
information if the issuance of Options under the Plan is limited to key
employees whose duties in connection with the Company assure their access to
equivalent information.

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<PAGE> 12

ALTERA CORPORATION

INCENTIVE STOCK OPTION AGREEMENT

(amended as of October 5, 1990)

Altera Corporation, a California corporation (the "Company"), has
granted to __________ (the "Optionee"), an option (the "Option") to purchase a
total of __________ shares of Common Stock (the "Shares"), at the price
determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the 1987 Stock Option Plan (the "Plan") adopted by
the Company, which is incorporated herein by reference. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings herein.

1. Nature of the Option. This Option is intended to qualify as
an Incentive Stock Option as defined in Section 422A of the Code.

2. Exercise Price. The exercise price is $__________ for each
share of Common Stock, which price is not less than the fair market value per
share of the Common Stock on the date of grant.

3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(a) Subject to subsections 3(i)(b), (c) and (d)
below, this Option shall be exercisable cumulatively, to the extent of 1.6667%
of the Shares subject to the Option for each month which has elapsed after
__________.

(b) This Option may not be exercised for a fraction
of a share.

(c) In the event of Optionee's death, disability or
other termination of employment, the exercisability of the Option is governed
by Sections 7, 8 and 9 below, subject to the limitations contained in
subsection 3(i)(d).

(d) In no event may this Option be exercised after
the date of expiration of the term of this Option as set forth in Section 11
below.

<PAGE> 13

Common Stock as may be required by the Company pursuant to the provisions of the
Plan. Such written notice shall be signed by the Optionee and shall be
delivered in person or by certified mail to the Secretary of the Company. The
written notice shall be accompanied by payment of the exercise price. This
Option shall be deemed to be exercised upon receipt by the Company of such
written notice accompanied by payment of the exercise price.

No shares will be issued pursuant to the exercise of an Option unless such
issuance and such exercise shall comply with all relevant provisions of law and
the requirements of any stock exchange upon which the Shares may then be
listed. Assuming such compliance, for income tax purposes the Shares shall be
considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

4. Optionee's Representations. In the event the Shares purchasable
pursuant to the exercise of this Option have not been registered under the
Securities Act of 1933, as amended, at the time this Option is exercised,
Optionee shall, concurrently with the exercise of all or any portion of this
Option, deliver to the Company his Investment Representation Statement in the
form provided by the Company.

5. Method of Payment. Payment of the exercise price shall be by any
of the following, or a combination thereof, at the election of the Optionee:

(i) cash;

(ii) check; or

(iii) surrender of other shares of Common Stock of the Company
of a value equal to the exercise price of the Shares as to which this Option is
being exercised.

6. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 207 of Title 12 of the Code of Federal Regulations ("Regulation G")
as promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.

7. Termination of Status as an Employee. In the event of
termination of Optionee's Continuous Status as an Employee, he may,

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<PAGE> 14
but only within thirty (30) days after the date of such termination (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 11 below), exercise this Option to the extent that he was entitled
to exercise it at the date of such termination. To the extent that he was not
entitled to exercise this Option at the date of such termination, or if he does
not exercise this Option within the time specified herein, the Option shall
terminate.

8. Disability of Optionee. Notwithstanding the provisions of
Section 7 above, in the event of termination of Optionee's Continuous Status as
an Employee as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), he may, but only within three (3) months from
the date of termination of employment (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below),
exercise his Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise this
Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, this
Option shall terminate.

9. Death of Optionee. In the event of the death of Optionee:

(i) during the term of this Option and while an Employee of
the Company and having been in Continuous Status as an Employee since the date
of grant of this Option, this Option may be exercised, at any time within six
(6) months following the date of death (but in no event later than the date of
expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise this Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had the Optionee continued living and remained in Continuous
Status as an Employee six (6) months after the date of death; or

(ii) within thirty (30) days after the termination of
Optionee's Continuous Status as an Employee, this Option may be exercised, at
any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 11 below), by Optionee's estate or by a person who acquired the right
to exercise this Option by bequest or inheritance, but only to the extent of
the right to exercise that had accrued at the date of termination.

10. Non-Transferability of Option. This Option may not be
transferred in any manner otherwise than by will or by the laws of descent or
distribution and may be exercised during the lifetime of

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<PAGE> 15
Optionee only by him. The terms of this Option shall be binding upon the
executors, administrators, heirs, successors and assigns of the Optionee.

11. Term of Option. This Option may not be exercised more than ten
(10) years (five years if the Optionee owns, immediately before this Option is
granted, stock representing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary)
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.

12. Early Disposition of Stock. Optionee understands that if he
disposes of any Shares received under this Option within two (2) years after
the date of grant of this Option or within one (1) year after such Shares were
transferred to him, he will be treated for federal income tax purposes as
having received ordinary income at the time of such disposition in an amount
generally measured by the difference between the price paid for the Shares and
the lower of the fair market value of the Shares at the date of the exercise or
the fair market value of the Shares at the date of disposition.

The amount of such ordinary income may be measured differently if Optionee
is an officer, director or 10% shareholder of the Company, or if the Shares
were subject to a substantial risk of forfeiture at the time they were
transferred to Optionee. Optionee hereby agrees to notify the Company in
writing within 30 days after the date of any such disposition. Optionee
understands that if he disposes of such Shares at any time after the expiration
of such two-year and one-year holding periods, any gain on such sale will be
taxed as long-term capital gain.

DATE OF GRANT: __________

ALTERA CORPORATION
a California corporation

By: ____________________________
Vice President

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<PAGE> 16

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT TO
SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING EMPLOYMENT AT THE WILL OF THE
COMPANY (NOT THROUGH THE ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR
ACQUIRING SHARES HEREUNDER). OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT
THIS OPTION, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE
SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED
EMPLOYMENT FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL.

Optionee acknowledges receipt of a copy of the Plan and the Prospectus
related thereto and represents that he is familiar with the terms and
provisions thereof, and hereby accepts this Option subject to all of the terms
and provisions thereof. Optionee has reviewed the Plan and this Option in
their entirety, has had an opportunity to obtain the advice of counsel prior to
executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.

Dated: ___________________

________________________________
Optionee

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<PAGE> 17

ALTERA CORPORATION

NONSTATUTORY STOCK OPTION AGREEMENT

(amended as of July 1, 1991)

Altera Corporation, a California corporation (the "Company"), has
granted to _______________ (the "Optionee"), an option (the "Option") to
purchase a total of __________ of Common Stock (the "Shares"), at the price
determined as provided herein, and in all respects subject to the terms,
definitions and provisions of the 1987 Stock Option Plan (the "Plan") adopted
by the Company, which is incorporated herein by reference. Unless otherwise
defined herein, the terms defined in the Plan shall have the same defined
meanings herein.

1. Nature of the Option. This Option is intended by the Company and the
Optionee to be a Nonstatutory Stock Option, and does not qualify for any
special tax benefits to the Optionee. This Option is not an Incentive Stock
Option and is not subject to Section 5(b) of the Plan.

2. Exercise Price. The exercise price is _______ for each share of
Common Stock.

3. Exercise of Option. This Option shall be exercisable during its term
in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(a) Subject to subsections 3(i)(b), (c) and (d) below, this
Option shall be exercisable cumulatively, to the extent of 10% of the Shares
subject to the Option on the anniversary date occurring one year after
(the "Measurement Date"), and 1.2500% of the Shares for each of the thirteenth
through the twenty-fourth full months, 1.6667% of the Shares for each of the
twenty-fifth through the thirty-sixth full months, 2.0833% of the Shares for
each of the thirty-seventh through the forty-eighth full months, and 2.500% of
the Shares subject to the Option on completion of each of the forty-ninth
through the sixtieth full months which have elapsed after such Measurement
Date.

(b) This Option may not be exercised for a fraction of a share.

(c) In the event of Optionee's death, disability or other
termination of employment or consulting relationship, the exercisability of the
Option is governed by Sections 7, 8 and 9 below.

(d) In no event may this Option be exercised after the date of
expiration of the term of this Option as set forth in Section 11 below.

<PAGE> 18
(ii) Method of Exercise. This Option shall be exercisable
by written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment
of the exercise price. This Option shall be deemed exercised upon receipt by
the Company of such written notice accompanied by payment of the exercise
price.

No Shares will be issued pursuant to the exercise of an Option unless
such issuance and such exercise shall comply with all relevant provisions of
law and the requirements of any stock exchange upon which the Shares may then
be listed. Assuming such compliance, for income tax purposes the Shares shall
be considered transferred to the Optionee on the date on which the Option is
exercised with respect to such Shares.

5. Method of Payment. Payment of the exercise price shall be by any of
the following, or a combination thereof, at the election of the Board:

(i) cash;

(ii) check; or

(iii) surrender of other shares of Common Stock of the Company
which have been held by the Optionee for not less than six months, of a value
equal to the exercise price of the Shares as to which the Option is being
exercised.

6. Restrictions on Exercise. This Option may not be exercised until
such time as the Plan has been approved by the shareholders of the Company, or
if the issuance of such Shares upon such exercise or the method of payment of
consideration for such shares would constitute a violation of any applicable
federal or state securities or other law or regulation, including any rule
under Part 107 of Title 12 of the Code of Federal Regulations ("Regulation G")
as promulgated by the Federal Reserve Board. As a condition to the exercise of
this Option, the Company may require Optionee to make any representation and
warranty to the Company as may be required by any applicable law or regulation.

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<PAGE> 19
7. Termination of Status as an Employee or Consultant. In the
event of termination of Optionee's Continuous Status as an Employee or
Consultant, he may, but only within thirty (30) days after the date of such
termination (but in no event later than the date of expiration of the term of
this Option as set forth in Section 11 below), exercise this Option to the
extent that he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise this Option at the date of such
termination, or if he does not exercise this Option within the time specified
herein, the Option shall terminate.

8. Disability of Optionee. Notwithstanding the provisions of Section 7
above, in the event of termination of Optionee's Continuous Status as an
Employee or Consultant as a result of his total and permanent disability (as
defined in Section 22(e)(3) of the Code), he may, but only within three (3)
months from the date of such termination (but in no event later than the date
of expiration of the term of this Option as set forth in Section 11 below),
exercise his Option to the extent he was entitled to exercise it at the date of
such termination. To the extent that he was not entitled to exercise the
Option at the date of termination, or if he does not exercise such Option
(which he was entitled to exercise) within the time specified herein, the
Option shall terminate.

9. Death of Optionee. In the event of the death of Optionee:

(i) during the term of this Option and while an Employee or
Consultant of the Company and having been in Continuous Status as an Employee
or Consultant since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of death (but
in no event later than the date of expiration of the term of this Option as set
forth in Section 11 below), by Optionee's estate or by a person who acquired
the right to exercise the Option by bequest or inheritance, but only to the
extent of the right to exercise that would have accrued had Optionee continued
living and remained in Continuous Status as an Employee or Consultant six (6)
months after the date of death; or

(ii) within thirty (30) days after the termination of Optionee's
Continuous Status as an Employee or Consultant, the Option may be exercised, at
any time within six (6) months following the date of death (but in no event
later than the date of expiration of the term of this Option as set forth in
Section 11 below), by Optionee's estate or by a person who acquired the right
to exercise the Option by bequest or inheritance, but only to the extent of the
right to exercise that had accrued at the date of termination.

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<PAGE> 20
10. Non-Transferability of Option. This Option may not be transferred in
any manner otherwise than by will or by the laws of descent or distribution and
may be exercised during the lifetime of Optionee only by him. The terms of
this Option shall be binding upon the executors, administrators, heirs,
successors and assigns of the Optionee.

11. Term of Option. This Option may not be exercised more than ten (10)
years (five (5) years if Optionee owns, immediately before the Option is
granted, stock representing more than 10 percent of the total combined voting
power of all classes of stock of the Company or of any Parent or Subsidiary)
from the date of grant of this Option, and may be exercised during such term
only in accordance with the Plan and the terms of this Option.

12. Taxation Upon Exercise of Option. Optionee understands that, upon
exercise of this Option, he will recognize income for tax purposes in an amount
equal to the excess of the then fair market value of the shares over the
exercise price. The Company will be required to withhold tax from Optionee's
current compensation with respect to such income; to the extent that Optionee's
current compensation is insufficient to satisfy the withholding tax liability,
the Company may require the Optionee to make a cash payment to cover such
liability as a condition of exercise of this Option. Upon a sale of such
shares by the Optionee, any difference between the sale price and the fair
market value of the shares on the date of exercise of the Option will be
treated as capital gain or loss.

DATE OF GRANT:

ALTERA CORPORATION
a California corporation

By:_________________________________
Vice President

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS AN EMPLOYEE OR
CONSULTANT AT THE WILL OF THE COMPANY. OPTIONEE FURTHER ACKNOWLEDGES AND
AGREES THAT THIS OPTION, THE TRANSACTIONS CONTEMPLATED HEREUNDER AND THE
VESTING SCHEDULE SET FORTH HEREIN DO NOT CONSTITUTE AN EXPRESS OR IMPLIED
PROMISE OF CONTINUED ENGAGEMENT AS AN EMPLOYEE OR CONSULTANT FOR THE VESTING
PERIOD, FOR ANY PERIOD, OR AT ALL.

-4-
<PAGE> 21
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.

Dated: _________________

______________________________
Optionee

-5-

<PAGE> 1

ALTERA CORPORATION

1987 EMPLOYEE STOCK PURCHASE PLAN

(As amended effective January 18, 1995)

The following constitute the provisions of the 1987 Employee Stock Purchase
Plan of Altera Corporation.

1. Purpose. The purpose of the Plan is to provide employees of the Company
and its Designated Subsidiaries with an opportunity to purchase Common Stock of
the Company through accumulated payroll deductions. It is the intention of the
Company to have the Plan qualify as an "Employee Stock Purchase Plan" under
Section 423 of the Internal Revenue Code of 1986, as amended. The provisions of
the Plan shall, accordingly, be construed so as to extend and limit
participation in a manner consistent with the requirements of that section of
the Code.

2. Definitions.

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Code" shall mean the Internal Revenue Code of 1986, as amended.

(d) "Company" shall mean Altera Corporation, a California corporation.

(e) "Compensation" shall mean all regular straight-time gross
earnings, plus sales commissions and sales incentives, but exclusive of
payments for overtime, shift premium, other incentive compensation, other
incentive payments, bonuses, or other compensation.

(f) "Continuous Status as an Employee" shall mean the absence of any
interruption or termination of service as an Employee. Continuous Status as
an Employee shall not be considered interrupted in the case of a leave of
absence agreed to in writing by the Company, provided that such leave is
for a period of not more than ninety (90) days or reemployment upon the
expiration of such leave is guaranteed by contract or statute.

(g) "Designated Subsidiaries" shall mean the Subsidiaries which have
been designated by the Board from time to time in its sole discretion as
eligible to participate in the Plan.
<PAGE> 2

(h) "Employee" shall mean any person, including an officer, who is
customarily employed for at least twenty (20) hours per week and more than
five (5) months in a calendar year by the Company or one of its Designated
Subsidiaries.

(i) "Exercise Date" shall mean the last day of each offering period of
the Plan.

(j) "Offering Date" shall mean the first day of each offering period
of the Plan.

(k) "Plan" shall mean this Employee Stock Purchase Plan.

(l) "Subsidiary" shall mean a corporation, domestic or foreign, of
which not less than fifty percent (50%) of the voting shares are held by
the Company or a Subsidiary, whether or not such corporation now exists or
is hereafter organized or acquired by the Company or a Subsidiary.

3. Eligibility.

(a) Any person who is an Employee as of the Offering Date of a given
offering period shall be eligible to participate in such offering period
under the Plan, subject to the requirements of paragraph 5(a) and the
limitations imposed by Section 423(b) of the Code.

(b) Any provisions of the Plan to the contrary notwithstanding, no
Employee shall be granted an option under the Plan (i) if, immediately
after the grant, such Employee (or any other person whose stock would be
attributed to such Employee pursuant to Section 425(d) of the Code) would
own stock and/or hold outstanding options to purchase stock possessing five
percent (5%) or more of the total combined voting power or value of all
classes of stock of the Company or of any subsidiary of the Company; or
(ii) which permits his rights to purchase stock under all employee stock
purchase plans (described in Section 423 of the Code) of the Company and
its subsidiaries to accrue at a rate which exceeds Twenty-five Thousand
Dollars ($25,000) of fair market value of such stock (determined at the
time such option is granted) for each calendar year in which such option is
outstanding at any time.

4. Offering Periods. The Plan shall be implemented by one offering during
each six- (6) month period of the Plan, commencing on or about August 16, 1988,
and continuing thereafter until terminated in accordance with paragraph 19
hereof. The Board shall have the power to change the duration of offering
periods with respect to future offerings without shareholder approval if such
change is announced at least fifteen (15) days prior to the scheduled beginning
of the first offering period to be affected.

-2-
<PAGE> 3

5. Participation.

(a) An eligible Employee may become a participant in the Plan by
completing a subscription agreement authorizing payroll deduction, on the
form provided by the Company, and filing it with the Company's payroll
office prior to the applicable Offering Date, unless a later time for
filing the subscription agreement is set by the Board for all eligible
Employees with respect to a given offering.

(b) Payroll deductions for a participant shall commence on the first
payroll following the Offering Date and shall end on the Exercise Date of
the offering to which such authorization is applicable, unless sooner
terminated by the participant as provided in paragraph 6(c) or 10.

6. Payroll Deductions.

(a) At the time a participant files his subscription agreement, he
shall elect to have payroll deductions made on each payday during the
offering period in an amount not exceeding ten percent (10%) of the
Compensation which he receives on such payday, and the aggregate of such
payroll deductions during the offering period shall not exceed ten percent
(10%) of his aggregate Compensation during said offering period.

(b) All payroll deductions made by a participant shall be credited to
his account under the Plan. A participant may not make any additional
payments into such account.

(c) A participant may discontinue his participation in the Plan as
provided in paragraph 10. A participant may also lower to zero, but not
thereafter increase, the rate of his payroll deductions during the offering
period by notifying the Company in writing. The decrease shall be effective
fifteen (15) days following the Company's receipt of the notification.
Should an eligible Employee decided to again participate in the Plan for
future offering periods, he must complete and file with the Company a new
authorization for payroll deduction.

7. Grant of Option.

(a) On the Offering Date of each offering period, each eligible
Employee participating in the Plan shall be granted an option to purchase
(at the per-share option price) up to a number of shares of the Company's
Common Stock determined by dividing such Employee's payroll deductions
accumulated during such offering period (not to exceed an amount equal to
ten percent (10%) of his Compensation during the applicable offering
period) by the option price as defined in Section 7(b) herein, subject to
the limitations set forth in Sections 3(b) and 12 hereof, and provided,
however, that in no event shall such option be exercisable for a number of
shares in excess of Twelve Thousand Five Hundred Dollars ($12,500) divided
by eighty-five percent (85%)

-3-
<PAGE> 4

of the fair market value of a share of the Company's Common Stock on the
Offering Date. Fair market value of a share of the Company's Common Stock
shall be determined as provided in Section 7(b) herein.

(b) The option price per share of the shares offered in a given
offering period shall be the lower of: (i) eighty-five percent (85%) of the
fair market value of a share of the Common Stock of the Company on the
Offering Date; or (ii) eighty-five percent (85%) of the fair market value
of a share of the Common Stock of the Company on the Exercise Date. The
fair market value of the Company's Common Stock on a given date shall be
determined by the Board in its discretion; provided, however, that where
there is a public market for the Common Stock, the fair market value per
share shall be the mean of the bid and asked prices of the Common Stock for
such date, as reported in The Wall Street Journal (or, if not so reported,
as otherwise reported by the National Association of Securities Dealers
Automated Quotation (NASDAQ) System) or, in the event the Common Stock is
listed on a stock exchange, the fair market value per share shall be the
closing price on such exchange on such date, as reported in The Wall Street
Journal.

8. Exercise of Option. Unless a participant withdraws from the Plan as
provided in paragraph 10, his option for the purchase of shares will be
exercised automatically on the Exercise Date of the offering period, and the
maximum number of full shares subject to option will be purchased for him at the
applicable option price with the accumulated payroll deductions in his account.
The shares purchased upon exercise of an option hereunder shall be deemed to be
transferred to the participant on the Exercise Date. During his lifetime, a
participant's option to purchase shares hereunder is exercisable only by him.

9. Delivery. As promptly as practicable after the Exercise Date of each
offering period, the Company shall arrange the delivery to each participant, as
appropriate, of a certificate representing the shares purchased upon exercise of
his option. Any cash remaining to the credit of a participant's account under
the Plan at the termination of each offering period which is insufficient to
purchase a full share of Common Stock of the Company shall be credited to the
participant's account for the next offering period, thereby reducing the maximum
amount which may be withheld from Compensation during such next offering period
if it would otherwise exceed the limits set forth in paragraphs 3(b) or 6(a),
or, if requested by the participant or if the participant has elected not to
participate for such following period, shall be returned to said participant.

10. Withdrawal; Termination of Employment.

(a) A participant may withdraw all, but not less than all, the payroll
deductions credited to his account under the Plan at any time prior to the
Exercise Date of the offering period by giving written notice to the
Company. All of the participant's payroll deductions credited to his
account will be paid to him promptly after receipt of his notice of
withdrawal, and his option for the current period will be automatically
terminated, and no further payroll deductions for the purchase of shares
will be made during the offering period.

-4-
<PAGE> 5

(b) Upon termination of the participant's Continuous Status as an
Employee prior to the Exercise Date of the offering period for any reason,
including retirement or death, the payroll deductions credited to his
account will be returned to him or, in the case of his death, to the person
or persons entitled thereto under paragraph 14, and his option will be
automatically terminated.

(c) In the event an Employee fails to remain in Continuous Status as
an Employee of the Company for at least twenty (20) hours per week during
the offering period in which the employee is a participant, he will be
deemed to have elected to withdraw from the Plan, and the payroll
deductions credited to his account will be returned to him and his option
terminated.

(d) A participant's withdrawal from an offering will not have any
effect upon his eligibility to participate in a succeeding offering or in
any similar plan which may hereafter be adopted by the Company.

11. Interest. No interest shall accrue on the payroll deductions of a
participant in the Plan.

12. Stock.

(a) The maximum number of shares of the Company's Common Stock which
shall be made available for sale under the Plan shall be seven hundred
thousand (700,000) shares, subject to adjustment upon changes in
capitalization of the Company as provided in paragraph 18. If the total
number of shares which would otherwise be subject to options granted
pursuant to Section 7(a) hereof on the Offering Date of an offering period
exceeds the number of shares then available under the Plan (after deduction
of all shares for which options have been exercised or are then
outstanding), the Company shall make a pro rata allocation of the shares
remaining available for option grant in as uniform a manner as shall be
practicable and as it shall determine to be equitable. In such event, the
Company shall give written notice of such reduction of the number of shares
subject to the option to each Employee affected thereby, and shall
similarly reduce the rate of payroll deductions, if necessary.

(b) The participant will have no interest or voting right in shares
covered by his option until such option has been exercised.

(c) Shares to be delivered to a participant under the Plan will be
registered in the name of the participant or in the name of the participant
and his spouse.

13. Administration. The Plan shall be administered by the Board of the
Company or a committee of members of the Board appointed by the Board. The
administration, interpretation or application of the Plan by the Board or its
committee shall be final, conclusive and binding upon all participants. Members
of the Board who are eligible Employees are permitted to participate in the
Plan, provided that:

-5-
<PAGE> 6

(a) Members of the Board who are eligible to participate in the Plan
may not vote on any matter affecting the administration of the Plan or the
grant of any option pursuant to the Plan.

(b) If a committee is established to administer the Plan, no member of
the Board who is eligible to participate in the Plan may be a member of the
committee.

14. Designation of Beneficiary.

(a) A participant may file a written designation of a beneficiary who
is to receive any shares and cash, if any, from the participant's account
under the Plan in the event of such participant's death subsequent to the
end of the offering period but prior to delivery to him of such shares and
cash. In addition, a participant may file a written designation of a
beneficiary who is to receive any cash from the participant's account under
the Plan in the event of such participant's death prior to the Exercise
Date of the offering period.

(b) Such designation of beneficiary may be changed by the participant
at any time by written notice. In the event of the death of a participant,
and in the absence of a beneficiary validly designated under the Plan who
is living at the time of such participant's death, the Company shall
deliver such shares and/or cash to the executor or administrator of the
estate of the participant; or, if no such executor or administrator has
been appointed (to the knowledge of the Company), the Company, in its
discretion, may deliver such shares and/or cash to the spouse or to any one
or more dependents or relatives of the participant; or, if no spouse,
dependent or relative is known to the Company, then to such other person as
the Company may designate.

15. Transferability. Neither payroll deductions credited to a
participant's account nor any rights, with regard to the exercise of an option
or to receive shares under the Plan, may be assigned, transferred, pledged or
otherwise disposed of in any way (other than by will, the laws of descent and
distribution or as provided in paragraph 14 hereof) by the participant. Any such
attempt at assignment, transfer, pledge or other disposition shall be without
effect, except that the Company may treat such act as an election to withdraw
funds in accordance with paragraph 10.

16. Use of Funds. All payroll deductions received or held by the Company
under the Plan may be used by the Company for any corporate purpose, and the
Company shall not be obligated to segregate such payroll deductions.

17. Reports. Individual accounts will be maintained for each participant
in the Plan. Statements of account will be given to participating Employees
promptly following the Exercise Date, which statements will set forth the
amounts of payroll deductions, the per share purchase price, the number of
shares purchased and the remaining cash balance, if any.

18. Adjustments Upon Changes in Capitalization. Subject to any required
action by the shareholders of the Company, the number of shares of Common Stock
covered by each option under

-6-
<PAGE> 7

the Plan which has not yet been exercised and the number of shares of Common
Stock which have been authorized for issuance under the Plan but have not yet
been placed under option (collectively, the "Reserves"), as well as the price
per share of Common Stock covered by each option under the Plan which has not
yet been exercised, shall be proportionately adjusted for any increase or
decrease in the number of issued shares of Common Stock resulting from a stock
split, reverse stock split, stock dividend, combination or reclassification of
the Common Stock, or any other increase or decrease in the number of shares of
Common Stock effected without receipt of consideration by the Company; provided,
however, that conversion of any convertible securities of the Company shall not
be deemed to have been "effected without receipt of consideration." Such
adjustment shall be made by the Board, whose determination in that respect shall
be final, binding and conclusive. Except as expressly provided herein, no issue
by the Company of shares of stock of any class, or securities convertible into
shares of stock of any class, shall affect, and no adjustment by reason thereof
shall be made with respect to, the number or price of shares of Common Stock
subject to an option.

In the event of the proposed dissolution or liquidation of the Company, the
offering period will terminate immediately prior to the consummation of such
proposed action, unless otherwise provided by the Board. In the event of a
proposed sale of all or substantially all of the assets of the Company, or the
merger of the Company with or into another corporation, each option under the
Plan shall be assumed or an equivalent option shall be substituted by such
successor corporation or a parent or subsidiary of such successor corporation,
unless the Board determines, in the exercise of its sole discretion and in lieu
of such assumption or substitution, that the participant shall have the right to
exercise the option as to all of the optioned stock, including shares as to
which the option would not otherwise be exercisable. If the Board makes an
option fully exercisable in lieu of assumption or substitution in the event of a
merger or sale of assets, the Board shall notify the participant that the option
shall be fully exercisable for a period of fifteen (15) days from the date of
such notice, and the option will terminate upon the expiration of such period.

The Board may, if it so determines in the exercise of its sole discretion,
also make provision for adjusting the Reserves, as well as the price per share
of Common Stock covered by each outstanding option, in the event that the
Company effects one or more reorganizations, recapitalizations, rights offerings
or other increases or reductions of shares of its outstanding Common Stock, and
in the event of the Company being consolidated with or merged into any other
corporation.

19. Amendment or Termination. The Board may at any time terminate or amend
the Plan. Except as provided in paragraph 18, no such termination can affect
options previously granted, nor may an amendment make any change in any option
theretofore granted which adversely affects the rights of any participant, nor
may an amendment be made without prior approval of the shareholders of the
Company (obtained in the manner described in paragraph 21) if such amendment
would:

(a) Increase the number of shares that may be issued under the Plan;

-7-
<PAGE> 8

(b) Permit payroll deductions at a rate in excess of ten percent (10%)
of the participant's Compensation;

(d) If the Company has a class of equity securities registered under
Section 12 of the Securities Exchange Act of 1934, as amended (the
"Exchange Act") at the time of such amendment, materially increase the
benefits which may accrue to participants under the Plan.

If any amendment requiring shareholder approval under this paragraph 19 of
the Plan is made subsequent to the first registration of any class of equity
securities by the Company under Section 12 of the Exchange Act, such shareholder
approval shall be solicited as described in paragraph 21 of the Plan.

20. Notices. All notices or other communications by a participant to the
Company under or in connection with the Plan shall be deemed to have been duly
given when received in the form specified by the Company at the location, or by
the person, designated by the Company for the receipt thereof.

21. Shareholder Approval.

(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company within twelve (12) months before or after the
date the Plan is adopted. If such shareholder approval is obtained at a
duly held shareholders' meeting, it must be obtained by the affirmative
vote of the holders of a majority of the outstanding shares of the Company,
or if such shareholder approval is obtained by written consent, it must be
obtained by the unanimous written consent of all shareholders of the
Company; provided, however, that approval at a meeting or by written
consent may be obtained by a lesser degree of shareholder approval if the
Board determines, in its discretion after consultation with the Company's
legal counsel, that such a lesser degree of shareholder approval will
comply with all applicable laws and will not adversely affect the
qualification of the Plan under Section 423 of the Code.

(c) If any required approval by the shareholders of the Plan itself or
of any amendment thereto is solicited at any time otherwise than in the
manner described in paragraph 21(b) hereof, then the Company shall, at or
prior to the first annual meeting of shareholders held subsequent to the
later of (i) the first registration of any class of equity securities of
the Company under

-8-
<PAGE> 9

Section 12 of the Exchange Act; or (ii) the granting of an option hereunder
to an officer or director after such registration, do the following:

(1) furnish in writing to the holders entitled to vote for the Plan
substantially the same information which would be required (if proxies to
be voted with respect to approval or disapproval of the Plan or amendment
were then being solicited) by the rules and regulations in effect under
Section 14(a) of the Exchange Act at the time such information is
furnished; and

(2) file with, or mail for filing to, the Securities and Exchange
Commission four (4) copies of the written information referred to in
subsection (1) hereof not later than the date on which such information is
first sent or given to shareholders.

22. Conditions Upon Issuance of Shares. Shares shall not be issued with
respect to an option unless the exercise of such option and the issuance and
delivery of such shares pursuant thereto shall comply with all applicable
provisions of law, domestic or foreign, including, without limitation, the
Securities Act of 1933, as amended, the Securities Exchange Act of 1934, as
amended, the rules and regulations promulgated thereunder, and the requirements
of any stock exchange upon which the shares may then be listed, and shall be
further subject to the approval of counsel for the Company with respect to such
compliance.

As a condition to the exercise of an option, the Company may require the
person exercising such option to represent and warrant at the time of any such
exercise that the shares are being purchased only for investment and without any
present intention to sell or distribute such shares if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned applicable provisions of law.

23. Term of Plan. The Plan shall become effective upon the earlier to
occur of its adoption by the Board or its approval by the shareholders of the
Company as described in paragraph 21. It shall continue in effect for a term of
twenty (20) years unless sooner terminated under paragraph 19.

-9-
<PAGE> 10

ALTERA CORPORATION
1987 EMPLOYEE STOCK PURCHASE PLAN
SUBSCRIPTION AGREEMENT

OFFERING DATE: __________________

<TABLE>
<S> <C> <C>
___ ORIGINAL APPLICATION ___CHANGE IN PAYROLL DEDUCTION RATE ___CHANGE OF BENEFICIARY(IES)
</TABLE>

1. I, ______________________________________, employee # __________ hereby
elect to participate in the Altera Corporation 1987 Employee Stock
Purchase Plan, as amended (the "Stock Purchase Plan"), and subscribe to
purchase shares of the Company's Common Stock, without par value, in
accordance with this Subscription Agreement and the Stock Purchase Plan.

2. I hereby authorize payroll deductions from each paycheck in an amount
equal to __________% (not to exceed 10%) of my Compensation on each payday
during the Offering Period in accordance with the Stock Purchase Plan.

3. I understand that said payroll deductions shall be accumulated for the
purchase of shares of Common Stock, without par value, at the applicable
purchase price determined in accordance with the Stock Purchase Plan.
I further understand that, except as otherwise set forth in the Stock
Purchase Plan, shares will be purchased for me automatically on the
Exercise Date of the Offering Period unless I otherwise withdraw from the
Stock Purchase Plan by giving written notice to the Company for such
purpose.

4. I have received a copy of the Company's most recent prospectus, which
describes the Stock Purchase Plan, and a copy of the complete "Altera
Corporation 1987 Employee Stock Purchase Plan". I understand that my
participation in the stock purchase plan is in all respects subject to the
terms of the Plan.

5. I HAVE NOT elected the DIRECT DEPOSIT PROGRAM. Please issue my shares
under the following
name(s)_______________________________________________________.

6. I HAVE elected the DIRECT DEPOSIT PROGRAM. My broker of choice is:

__ Smith Barney __ Charles Schwab

My account number is ______________________________

7. I hereby agree to be bound by the terms of the Stock Purchase Plan. The
effectiveness of this Subscription Agreement is dependent upon my
eligibility to participate in the Stock Purchase Plan.

_____________________________________________ ___________________
Employee Signature Date

<PAGE> 11
ALTERA CORPORATION EMPLOYEE STOCK PURCHASE PLAN
BENEFICIARY DESIGNATION

In the event of my death, I hereby designate the following as my
beneficiary(ies) to receive all payments and shares due me under the Stock
Purchase Plan:

PRIMARY (PLEASE PRINT)

NAME: (PLEASE PRINT)

__________________________________________________________________________
(FIRST) (MIDDLE) (LAST) (RELATIONSHIP)

__________________________________________________________________________
(STREET ADDRESS)

__________________________________________________________________________
(CITY) (STATE) (ZIP)

SECONDARY (PLEASE PRINT)

__________________________________________________________________________
(FIRST) (MIDDLE) (LAST) (RELATIONSHIP)

__________________________________________________________________________
(STREET ADDRESS)

__________________________________________________________________________
(CITY) (STATE) (ZIP)

__________________________________________________________________________
(FIRST) (MIDDLE) (LAST) (RELATIONSHIP)

__________________________________________________________________________
(STREET ADDRESS)

__________________________________________________________________________
(CITY) (STATE) (ZIP)

______________________________________________ _______________
EMPLOYEE SIGNATURE DATE

<PAGE> 1

INDEMNIFICATION AGREEMENT

THIS INDEMNIFICATION AGREEMENT ("Agreement") is made as of this _____ day of
__________, 19__ by and between Altera Corporation, a California corporation
(the "Company"), and _______________________________________________
("Indemnitee").

WHEREAS, the Company and Indemnitee recognize the increasing difficulty in
obtaining directors' and officers' liability insurance, the significant
increases in the cost of such insurance and the general reductions in the
coverage of such insurance;

WHEREAS, the Company and Indemnitee further recognize the substantial
increase in corporate litigation in general, subjecting officers and directors
to expensive litigation risks at the same time as the availability and coverage
of liability insurance has been severely limited;

WHEREAS, Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other officers and
directors of the Company may not be willing to continue to serve as officers
and directors without additional protection; and

WHEREAS, the Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as officers and directors
of the Company and to indemnify its officers and directors so as to provide
them with the maximum protection permitted by law.

NOW, THEREFORE, the Company and Indemnitee hereby agree as follows:

1. INDEMNIFICATION.

(a) Third-Party Proceedings. The Company shall indemnify Indemnitee if
Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right of the
Company) by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason
of any action or inaction on the part of Indemnitee while an officer or
director or by reason of the fact that Indemnitee is or was serving at the
request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company, which
approval shall not be unreasonably withheld) actually and reasonably incurred
by Indemnitee in connection with such action or proceeding if Indemnitee acted
in good faith and in a manner Indemnitee believed to be in the best interests
of the Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action or proceeding by judgment, order, settlement, conviction, or upon
a plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that (i) Indemnitee did
<PAGE> 2

not act in good faith and in a manner which Indemnitee reasonably believed to
be in the best interests of the Company, or (ii) with respect to any criminal
action or proceeding, Indemnitee had reasonable cause to believe that
Indemnitee's conduct was unlawful.

(b) Proceedings By or in the Right of the Company. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be
made a party to any threatened, pending or completed action or proceeding by or
in the right of the Company or any subsidiary of the Company to procure a
judgment in its favor by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while an
officer or director or by reason of the fact that Indemnitee is or was serving
at the request of the Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) and, to the fullest extent
permitted by law, amounts paid in settlement, in each case to the extent
actually and reasonably incurred by Indemnitee in connection with the defense
or settlement of such action or proceeding if Indemnitee acted in good faith
and in a manner Indemnitee believed to be in the best interests of the Company
and its shareholders.

2. EXPENSES; INDEMNIFICATION PROCEDURE.

(a) Advancement of Expenses. The Company shall advance all expenses
incurred by Indemnitee in connection with the investigation, defense,
settlement or appeal of any civil or criminal action or proceeding referenced
in Section 1(a) or (b) hereof (but not amounts actually paid in settlement of
any such action or proceeding). Indemnitee hereby undertakes to repay such
amounts advanced only if, and to the extent that, it shall ultimately be
determined that Indemnitee is not entitled to be indemnified by the Company as
authorized hereby. The advances to be made hereunder shall be paid by the
Company to Indemnitee within twenty (20) days following delivery of a written
request therefor by Indemnitee to the Company.

(b) Notice/Cooperation by Indemnitee. Indemnitee shall, as a condition
precedent to his right to be indemnified under this Agreement, give the Company
notice in writing as soon as practicable of any claim made against Indemnitee
for which indemnification will or could be sought under this Agreement. Notice
to the Company shall be directed to the Chief Executive Officer of the Company
at the address shown on the signature page of this Agreement (or such other
address as the Company shall designate in writing to Indemnitee). Notice shall
be deemed received three (3) business days after the date postmarked if sent by
domestic certified or registered mail, properly addressed; otherwise notice
shall be deemed received when such notice shall actually be received by the
Company. In addition, Indemnitee shall give the Company such information and
cooperation as it may reasonably require and as shall be within Indemnitee's
power.
<PAGE> 3
(c) Procedure. Any indemnification provided for in Section 1 shall be
made no later than forty-five (45) days after receipt of the written request of
Indemnitee. If a claim under this Agreement, under any statute, or under any
provision of the Company's Articles of Incorporation or By-laws providing for
indemnification, is not paid in full by the Company within forty-five (45) days
after a written request for payment thereof has first been received by the
Company, Indemnitee may, but need not, at any time thereafter bring an action
against the Company to recover the unpaid amount of the claim and, subject to
Section 13 of this Agreement, Indemnitee shall also be entitled to be paid for
the expenses (including attorneys' fees) of bringing such action. It shall be
a defense to any such action (other than an action brought to enforce a claim
for expenses incurred in connection with any action or proceeding in advance of
its final disposition) that Indemnitee has not met the standards of conduct
which make it permissible under applicable law for the Company to indemnify
Indemnitee for the amount claimed but the burden of proving such defense shall
be on the Company, and Indemnitee shall be entitled to receive interim payments
of expenses pursuant to Subsection 2(a) unless and until such defense may be
finally adjudicated by court order or judgment from which no further right of
appeal exists. It is the parties' intention that if the Company contests
Indemnitee's right to indemnification, the question of Indemnitee's right to
indemnification shall be for the court to decide, and neither the failure of
the Company (including its Board of Directors, any committee or subgroup of the
Board of Directors, independent legal counsel, or its shareholders) to have
made a determination that indemnification of Indemnitee is proper in the
circumstances because Indemnitee has met the applicable standard of conduct
required by applicable law, nor an actual determination by the Company
(including its Board of Directors, any committee or subgroup of the Board of
Directors, independent legal counsel, or its shareholders) that Indemnitee has
not met such applicable standard of conduct, shall create a presumption that
Indemnitee has or has not met the applicable standard of conduct.

(d) Notice to Insurers. If, at the time of the receipt of a notice of a
claim pursuant to Section 2(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.

(e) Selection of Counsel. In the event the Company shall be obligated
under Section 2(a) hereof to pay the expenses of any proceeding against
Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, which approval
shall not be unreasonably withheld, upon the delivery to Indemnitee of written
notice of its election so to do. After delivery of such notice, approval of
such counsel by Indemnitee and the retention of such counsel by the Company,
the Company will not be liable to Indemnitee under this Agreement for any fees
of counsel subsequently incurred by Indemnitee with respect to the same
proceeding, provided that (i) Indemnitee shall have the right to employ his
counsel in any such proceeding at Indemnitee's expense; and (ii) if (A) the

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<PAGE> 4
employment of counsel by Indemnitee has been previously authorized by the
Company, (B) Indemnitee shall have reasonably concluded that there may be a
conflict of interest between the Company and Indemnitee in the conduct of any
such defense or (C) the Company shall not, in fact, have employed counsel to
assume the defense of such proceeding, then the fees and expenses of
Indemnitee's counsel shall be at the expense of the Company.

3. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.

(a) Scope. Notwithstanding any other provision of this Agreement, the
Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Articles of
Incorporation, the Company's By-laws or by statute. In the event of any
change, after the date of this Agreement, in any applicable law, statute or
rule which expands the right of a California corporation to indemnify a member
of its board of directors, an officer or other corporate agent, such changes
shall be, ipso facto, within the purview of Indemnitee's rights and Company's
obligations, under this Agreement. In the event of any change in any
applicable law, statute, or rule which narrows the right of a California
corporation to indemnify a member of its Board of Directors, an officer, or
other corporate agent, such changes, to the extent not otherwise required by
such law, statute, or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.

(b) Nonexclusivity. The indemnification provided by this Agreement shall
not be deemed exclusive of any rights to which Indemnitee may be entitled under
the Company's Articles of Incorporation, its By-laws, any agreement, any vote
of shareholders or disinterested directors, the California General Corporation
Law, or otherwise, both as to action in Indemnitee's official capacity and as
to action in another capacity while holding such office. The indemnification
provided under this Agreement shall continue as to Indemnitee for any action
taken or not taken while serving in an indemnified capacity even though he may
have ceased to serve in such capacity at the time of any action or other
covered proceeding.

4. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of the
expenses, judgments, fines or penalties actually or reasonably incurred by him
in the investigation, defense, appeal or settlement of any civil or criminal
action or proceeding, but not, however, for the total amount thereof, the
Company shall nevertheless indemnify Indemnitee for the portion of such
expenses, judgments, fines or penalties to which Indemnitee is entitled.

5. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge that
in certain instances, Federal law or applicable public policy may prohibit the
Company from indemnifying its directors and officers under this Agreement or
otherwise. Indemnitee understands and acknowledges that the Company has
undertaken or may be required in the future to undertake with the Securities
and Exchange Commission to submit the question of

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<PAGE> 5
indemnification to a court in certain circumstances for a determination of the
Company's right under public policy to indemnify Indemnitee.

6. DIRECTORS' AND OFFICERS' LIABILITY INSURANCE. The Company shall, from
time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain a policy or policies of
insurance with reputable insurance companies providing the officers and
directors of the Company with coverage for losses from wrongful acts, or to
ensure the Company's performance of its indemnification obligations under this
Agreement. Among other considerations, the Company will weigh the costs of
obtaining such insurance coverage against the protection afforded by such
coverage. In all policies of directors' and officers' liability insurance,
Indemnitee shall be named as an insured in such a manner as to provide
Indemnitee the same rights and benefits as are accorded to the most favorably
insured of the Company's directors, if Indemnitee is a director; or of the
Company's officers, if Indemnitee is not a director of the Company but is an
officer; or of the Company's key employees, if Indemnitee is not an officer or
director but is a key employee. Notwithstanding the foregoing, the Company
shall have no obligation to obtain or maintain such insurance if the Company
determines in good faith that such insurance is not reasonably available, if
the premium costs for such insurance are disproportionate to the amount of
coverage provided, if the coverage provided by such insurance is limited by
exclusions so as to provide an insufficient benefit, or if Indemnitee is
covered by similar insurance maintained by a subsidiary or parent of the
Company.

7. SEVERABILITY. Nothing in this Agreement is intended to require or shall
be construed as requiring the Company to do or fail to do any act in violation
of applicable law. The Company's inability, pursuant to court order, to
perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 7. If this Agreement or any portion hereof shall be
invalidated on any ground by any court of competent jurisdiction, then the
Company shall nevertheless indemnify Indemnitee to the full extent permitted by
any applicable portion of this Agreement that shall not have been invalidated,
and the balance of this Agreement not so invalidated shall be enforceable in
accordance with its terms.

8. EXCEPTIONS. Any other provision herein to the contrary notwithstanding,
the Company shall not be obligated pursuant to the terms of this Agreement:

(a) Excluded Acts. To indemnify Indemnitee for any acts or omissions or
transactions from which a director may not be relieved of liability under the
California General Corporation Law.

(b) Claims Initiated by Indemnitee. To indemnify or advance expenses to
Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way of defense, except with respect to
proceedings brought to establish or enforce a right to indemnification under
this Agreement or any other statute or law or otherwise as required under
Section 317 of the California General Corporation Law, but such indemnification

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<PAGE> 6
or advancement of expenses may be provided by the Company in specific cases if
the Board of Directors has approved the initiation or bringing of such suit; or

(c) Lack of Good Faith. To indemnify Indemnitee for any expenses incurred
by the Indemnitee with respect to any proceeding instituted by Indemnitee to
enforce or interpret this Agreement, if a court of competent jurisdiction
determines that each of the material assertions made by the Indemnitee in such
proceeding was not made in good faith or was frivolous; or

(d) Insured Claims. To indemnify Indemnitee for expenses or liabilities
of any type whatsoever (including, but not limited to, judgments, fines, ERISA
excise taxes or penalties, and amounts paid in settlement) which have been paid
directly to Indemnitee by an insurance carrier under a policy of directors' and
officers' liability insurance maintained by the Company; or

(e) Claims Under Section 16(b). To indemnify Indemnitee for expenses and
the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of
1934, as amended, or any similar successor statute.

9. EFFECTIVENESS OF AGREEMENT. To the extent that the indemnification
permitted under the terms of certain provisions of this Agreement exceeds the
scope of the indemnification expressly permitted by Section 317 of the
California General Corporation Law, such provisions shall not be effective
unless and until the Company's Articles of Incorporation authorize such
additional rights of indemnification. In all other respects, the balance of
this Agreement shall be effective as of the date set forth on the first page
and may apply to acts or omissions of Indemnitee which occurred prior to such
date if Indemnitee was an officer, director, employee or other agent of the
Company, or was serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise, at the time such act or omission occurred.

10. CONSTRUCTION OF CERTAIN PHRASES.

(a) For purposes of this Agreement, references to the "Company" shall also
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees or agents, so that if
Indemnitee is or was a director, officer, employee or agent of such constituent
corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand
in the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to
such constituent corporation if its separate existence had continued.

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<PAGE> 7
(b) For purposes of this Agreement, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "serving at the request of the Company" shall include any
service as a director, officer, employee or agent of the Company which imposes
duties on, or involves services by, such director, officer, employee or agent
with respect to an employee benefit plan, its participants, or beneficiaries.

11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.

12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.

13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms
hereof, Indemnitee shall be entitled to be paid all costs and expenses,
including reasonable attorneys' fees, incurred by Indemnitee with respect to
such action, unless as a part of such action, a court of competent jurisdiction
determines that each of the material assertions made by Indemnitee as a basis
for such action were not made in good faith or were frivolous. In the event of
an action instituted by or in the name of the Company under this Agreement or
to enforce or interpret any of the terms of this Agreement, Indemnitee shall be
entitled to be paid all costs and expenses, including reasonable attorneys'
fees, incurred by Indemnitee in defense of such action (including with respect
to Indemnitee's counterclaims and cross-claims made in such action), unless as
a part of such action the court determines that each of Indemnitee's material
defenses to such action were made in bad faith or were frivolous.

14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with
postage prepaid, on the third business day after the date postmarked.
Addresses for notice to either party are as shown on the signature page of this
Agreement, or as subsequently modified by written notice.

15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of
California for all purposes in connection with any action or proceeding which
arises out of or relates to this Agreement and agree that any action instituted
under this Agreement shall be brought only in the state courts of the State of
California.

16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of California as applied to
contracts between California residents entered into and to be performed
entirely within California.

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<PAGE> 8
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date first above written.

ALTERA CORPORATION

By:_____________________________________

Title:__________________________________

Address: 2610 Orchard Parkway
San Jose, CA 95134-2020

AGREED TO AND ACCEPTED:

INDEMNITEE:

______________________________

______________________________
(signature)

______________________________

______________________________
(address)

-8-

<PAGE> 1

ALTERA CORPORATION

1988 DIRECTOR STOCK OPTION PLAN

(As amended effective January 18, 1995)

1. Purposes of the Plan. The purposes of this Director Stock Option Plan
are to attract and retain the best available personnel for service as Directors
of the Company, to provide additional incentive to the Outside Directors of the
Company to serve as Directors, and to encourage their continued service on the
Board.

All options granted hereunder shall be "non-statutory stock options".

2. Definitions. As used herein, the following definitions shall apply:

(a) "Board" shall mean the Board of Directors of the Company.

(b) "Common Stock" shall mean the Common Stock of the Company.

(d) "Continuous Status as a Director" shall mean the absence of any
interruption or termination of service as a Director.

(e) "Director" shall mean a member of the Board.

(f) "Employee" shall mean any person, including officers and
Directors, employed by the Company or any Parent or Subsidiary of the
Company. The payment of a director's fee by the Company shall not be
sufficient in and of itself to constitute "employment" by the Company.

(g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended.

(h) "Option" shall mean a stock option granted pursuant to the Plan.

(i) "Optioned Stock" shall mean the Common Stock subject to an Option.

(j) "Optionee" shall mean an Outside Director who receives an Option.

(k) "Outside Director" shall mean a Director who is not an Employee.

(l) "Parent" shall mean a "parent corporation", whether now or
hereafter existing, as defined in Section 425(e) of the Internal Revenue
Code of 1986, as amended.
<PAGE> 2

(m) "Plan" shall mean this 1988 Director Stock Option Plan, as
amended.

(n) "Share" shall mean a share of the Common Stock, as adjusted in
accordance with Section 11 of the Plan.

(o) "Subsidiary" shall mean a "subsidiary corporation", whether now or
hereafter existing, as defined in Section 425(f) of the Internal Revenue
Code of 1986, as amended.

3. Stock Subject to the Plan. Subject to the provisions of Section 11 of
the Plan, the maximum aggregate number of Shares which may be optioned and sold
under the Plan is 200,000 Shares (the "Pool") of Common Stock. The Shares may be
authorized, but unissued, or reacquired Common Stock.

If an Option should expire or become unexercisable for any reason without
having been exercised in full, the unpurchased Shares which were subject thereto
shall, unless the Plan shall have been terminated, become available for future
grant under the Plan.

4. Administration of and Grants of Options under the Plan.

(a) Administrator. Except as otherwise required herein, the Plan
shall be administered by the Board.

(b) Procedure for Grants. All grants of Options hereunder shall be
automatic and non-discretionary and shall be made strictly in accordance
with the following provisions:

(i) No person shall have any discretion to select which Outside
Directors shall be granted Options or to determine the number of Shares
to be covered by Options granted to Outside Directors.

(ii) Each Outside Director shall be automatically granted an Option
to purchase 20,000 Shares (the "First Option") upon the later to occur
of (A) the effective date of this Plan, as determined in accordance with
Section 6 hereof, or (B) the date on which such person first becomes an
Outside Director, whether through election by the shareholders of the
Company, appointment by the Board of Directors to fill a vacancy, or
(for an employee director) by ceasing to be employed by the Company.

(iii) After the First Option has been granted to an Outside
Director, such Outside Director shall thereafter be automatically
granted an Option to purchase 5,000 Shares (a "Subsequent Option") on
the day of each annual shareholders meeting, at which such Outside
Director is reelected to an additional term, occurring after the grant
date of such Outside Director's First Option; provided, however, that in
no event shall an Outside Director be granted Options to purchase in the
aggregate more than 50,000 shares.

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<PAGE> 3

(iv) Notwithstanding the provisions of subsections (ii) and (iii)
hereof, in the event that a grant would cause the number of Shares
subject to outstanding Options plus the number of Shares previously
purchased upon exercise of Options to exceed the Pool, then each such
automatic grant shall be for that number of Shares determined by
dividing the total number of Shares remaining available for grant by the
number of Outside Directors on the automatic grant date. Any further
grants shall then be deferred until such time, if any, as additional
Shares become available for grant under the Plan through action to
increase the number of Shares which may be issued under the Plan or
through cancellation or expiration of Options previously granted
hereunder.

(v) The terms of an Option granted hereunder shall be consistent
with the requirements set forth elsewhere in this plan and shall
additionally include the following:

(A) the Option shall be exercisable only while the Outside
Director remains a Director of the Company, except as set forth in
Section 9 hereof.

(B) Subsequent Options granted prior to January 14, 1992 and all
First Options shall become exercisable in installments cumulatively
with respect to 25% of the Shares on the first day of the first year
after the date of grant of such First Option and with respect to
2.083% of the Shares for each month after such anniversary.
Subsequent Options granted on or after January 14, 1992 shall become
exercisable in installments cumulatively with respect to 8.34% of the
shares for each month beginning after the First Option and all other
Subsequent Options, if any, are fully vested. However, in no event
shall any Option be exercisable prior to obtaining shareholder
approval of the Plan in accordance with Section 17 hereof.

(c) Powers of the Board. Subject to the provisions and restrictions
of the Plan, the Board shall have the authority, in its discretion: (i) to
determine, upon review of relevant information and in accordance with
Section 8(b) of the Plan, the fair market value of the Common Stock; (ii)
to determine the exercise price per share of Options to be granted, which
exercise price shall be determined in accordance with Section 8(a) of the
Plan; (iii) to interpret the Plan; (iv) to prescribe, amend and rescind
rules and regulations relating to the Plan; (v) to authorize any person to
execute on behalf of the Company any instrument required to effectuate the
grant of an Option previously granted hereunder; and (vi) to make all other
determinations deemed necessary or advisable for the administration of the
Plan.

(d) Effect of Board's Decision. All decisions, determinations and
interpretations of the Board shall be final and binding on all Optionees
and any other holders of any Options granted under the Plan.

(e) Suspension or Termination of Option. If the President or his
designee reasonably believes that an Optionee has committed an act of
misconduct, the President may suspend the Optionee's right to exercise any
option pending a determination by the Board of Directors (excluding the
Outside Director accused of such misconduct). If the Board of Directors
(excluding the Outside Director accused of such misconduct) determines an
Optionee has committed an act of

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<PAGE> 4

embezzlement, fraud, dishonesty, nonpayment of an obligation owed to the
Company, breach of fiduciary duty or deliberate disregard of the Company
rules resulting in loss, damage or injury to the Company, or if an Optionee
makes an unauthorized disclosure of any Company trade secret or
confidential information, engages in any conduct constituting unfair
competition, induces any Company customer to breach a contract with the
Company or induces any principal for whom the Company acts as agent to
terminate such agency relationship, neither the Optionee nor his estate
shall be entitled to exercise any option whatsoever. In making such
determination, the Board of Directors (excluding the Outside Director
accused of such misconduct) shall act fairly and shall give the Optionee an
opportunity to appear and present evidence on Optionee's behalf at a
hearing before a committee of the Board.

5. Eligibility. Options may be granted only to Outside Directors. All
Options shall be automatically granted in accordance with the terms set forth in
Section 4(b) hereof. An Outside Director who has been granted an Option may, if
he is otherwise eligible, be granted an additional Option or Options in
accordance with such provisions.

The Plan shall not confer upon any Optionee any right with respect to
continuation of service as a Director or nomination to serve as a Director, nor
shall it interfere in any way with any rights which the Director or the Company
may have to terminate his directorship at any time.

7. Term of Option. The term of each Option shall be ten (10) years from
the date of grant thereof.

8. Exercise Price and Consideration.

(a) Exercise Price. The per Share exercise price for the Shares to be
issued pursuant to exercise of an Option shall be 100% of the fair market
value per Share on the date of grant of the Option.

(b) Fair Market Value. The fair market value shall be determined by
the Board in its discretion; provided, however, that where there is a
public market for the Common Stock, the fair market value per Share shall
be the mean of the bid and asked prices of the Common Stock in the
over-the-counter market on the date of grant, as reported in the Wall
Street Journal (or, if not so reported, as otherwise reported by the
National Association of Securities Dealers Automated Quotation ("NASDAQ")
System) or, in the event the Common Stock is traded on the NASDAQ National
Market System or listed on a stock exchange, the fair market value per
Share shall be the closing price on such system or exchange on the date of
grant of the Option, as reported in the Wall Street Journal.

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<PAGE> 5

(c) Form of Consideration. The consideration to be paid for the
Shares to be issued upon exercise of an Option shall consist entirely of
cash, check, other Shares of Common Stock having a fair market value on the
date of surrender equal to the aggregate exercise price of the Shares as to
which said Option shall be exercised, or any combination of such methods of
payment.

9. Exercise of Option.

(a) Procedure for Exercise; Rights as a Shareholder. Any Option
granted hereunder shall be exercisable at such times as are set forth in
Section 4(b) hereof; provided, however, that no Options shall be
exercisable until shareholder approval of the Plan in accordance with
Section 17 hereof has been obtained.

An Option may not be exercised for a fraction of a Share.

An Option shall be deemed to be exercised when written notice of such
exercise has been given to the Company in accordance with the terms of the
Option by the person entitled to exercise the Option and full payment for
the Shares with respect to which the Option is exercised has been received
by the Company. Full payment may consist of any consideration and method of
payment allowable under Section 8(c) of the Plan. Until the issuance (as
evidenced by the appropriate entry on the books of the Company or of a duly
authorized transfer agent of the Company) of the stock certificate
evidencing such Shares, no right to vote or receive dividends or any other
rights as a shareholder shall exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. A share certificate for the
number of Shares so acquired shall be issued to the Optionee as soon as
practicable after exercise of the Option. No adjustment will be made for a
dividend or other right for which the record date is prior to the date the
stock certificate is issued, except as provided in Section 11 of the Plan.

(b) Termination of Status as a Director. In the event of the
termination of the Outside Director's Continuous Status as a Director, he
may, but only within thirty (30) days after the date of such termination,
exercise his Option to the extent that he was entitled to exercise it at
the date of such termination. To the extent that he was not entitled to
exercise an Option at the date of such termination, or if he does not
exercise such Option (which he was entitled to exercise) within the time
specified herein, the Option shall terminate.

(c) Disability of Optionee. Notwithstanding the provisions of Section
9(b) above, in the event a Director is unable to continue his service as a
Director with the Company as a result of his total and permanent disability
(as defined in Section 22(e)(3) of the Internal Revenue Code), he may, but
only within three (3) months from the date of termination, exercise his
Option to the

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<PAGE> 6

extent he was entitled to exercise it at the date of such termination. To
the extent that he was not entitled to exercise the Option at the date of
termination, or if he does not exercise such Option (which he was entitled
to exercise) within the time specified herein, the Option shall terminate.

(d) Death of Optionee. In the event of the death of an Optionee:

(i) during the term of the Option who is at the time of his death a
Director of the Company and who shall have been in Continuous Status as
a Director since the date of grant of the Option, the Option may be
exercised, at any time within six (6) months following the date of
death, by the Optionee's estate or by a person who acquired the right to
exercise the Option by bequest or inheritance, but only to the extent of
the right to exercise that would have accrued had the Optionee continued
living and remained in Continuous Status a Director for six (6) months
after the date of death.

(ii) within thirty (30) days after the termination of Continuous
Status as a Director, the Option may be exercised, at any time within
six (6) months following the date of death, by the Optionee's estate or
by a person who acquired the right to exercise the Option by bequest or
inheritance, but only to the extent of the right to exercise that had
accrued at the date of termination.

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<PAGE> 7

In the event of the proposed dissolution or liquidation of the Company, the
Option will terminate immediately prior to the consummation of such proposed
action, unless otherwise provided by the Board. The Board may, in the exercise
of its sole discretion in such instances, declare that any Option shall
terminate as of a date fixed by the Board and give each Optionee the right to
exercise his Option as to all or any part of the Optioned Stock, including
Shares as to which the Option would not otherwise be exercisable. In the event
of a proposed sale of all or substantially all of the assets of the Company, or
the merger of the Company with or into another corporation, the Option shall be
assumed or an equivalent option shall be substituted by such successor
corporation or a parent or subsidiary of such successor corporation. If however
such successor corporation does not agree to fully assume such options, the
Board shall act to fully accelerate the vesting of all of the shares subject to
each outstanding option such that the Optionee shall have the right to exercise
the Option as to all of the Optioned Stock, including Shares as to which the
Option would not otherwise be exercisable. If the Board makes an Option fully
exercisable in lieu of assumption or substitution in the event of a merger or
sale of assets, the Board shall notify the Optionee that the Option shall be
fully exercisable for a period of thirty (30) days from the date of such notice,
and the Option will terminate upon the expiration of such period.

12. Time of Granting Options. The date of grant of an Option shall, for
all purposes, be the date determined in accordance with Section 4(b) hereof.
Notice of the determination shall be given to each Outside Director to whom an
Option is so granted within a reasonable time after the date of such grant.

13. Amendment and Termination of the Plan.

(i) any increase in the number of Shares subject to the Plan, other
than in connection with an adjustment under Section 11 of the Plan; or

(ii) any change in the designation of the class of persons eligible
to be granted Options; or

(iii) any material increase in the benefits accruing to
participants under the Plan; or

(iv) any change in the number of shares subject to Options to be
granted hereunder or in the terms thereof as set forth in Section 4(b)
hereof.

Notwithstanding the foregoing, the provisions set forth in Section
4(b) of this Plan (and any other Sections of this Plan that affect the
formula award terms required to be specified in this Plan

-7-
<PAGE> 8

by Rule 16b-3) shall not be amended more that once every six months, other
than to comport with changes in the Code, the Employee Retirement Income
Security Act, or the rules thereunder.

(b) Shareholder Approval. Shareholder approval of any amendment
requiring shareholder approval under Section 13(a) of the Plan shall be
solicited as described in Section 17 of the Plan.

14. Conditions Upon Issuance of Shares. Shares shall not be issued
pursuant to the exercise of an Option unless the exercise of such Option and the
issuance and delivery of such Shares pursuant thereto shall comply with all
relevant provisions of law, including, without limitation, the Securities Act of
1933, as amended, the Exchange Act, the rules and regulations promulgated
thereunder, state securities laws, and the requirements of any stock exchange
upon which the Shares may then be listed, and shall be further subject to the
approval of counsel for the Company with respect to such compliance.

As a condition to the exercise of an Option, the Company may require the
person exercising such Option to represent and warrant at the time of any such
exercise that the Shares are being purchased only for investment and without any
present intention to sell or distribute such Shares, if, in the opinion of
counsel for the Company, such a representation is required by any of the
aforementioned relevant provisions of law.

Inability of the Company to obtain authority from any regulatory body
having jurisdiction, which authority is deemed by the Company's counsel to be
necessary to the lawful issuance and sale of any Shares hereunder, shall relieve
the Company of any liability in respect of the failure to issue or sell such
Shares as to which such requisite authority shall not have been obtained.

16. Option Agreement. Options shall be evidenced by written option
agreements in such form as the Board shall approve.

-8-
<PAGE> 9

17. Shareholder Approval.

(a) Continuance of the Plan shall be subject to approval by the
shareholders of the Company at or prior to the first annual meeting of
shareholders held subsequent to the granting of an Option hereunder. If
such shareholder approval is obtained at a duly held shareholders' meeting,
it may be obtained by the affirmative vote of the holders of a majority of
the outstanding shares of the Company present or represented and entitled
to vote thereon. If such shareholder approval is obtained by written
consent, it may be obtained by the written consent of the holders of a
majority of the outstanding shares of the Company.

(b) Any required approval of the shareholders of the Company shall be
solicited substantially in accordance with Section 14(a) of the Exchange
Act and the rules and regulations promulgated thereunder.

-9-
<PAGE> 10

ALTERA CORPORATION

OUTSIDE DIRECTOR

NONSTATUTORY STOCK OPTION AGREEMENT
(First Option as amended January 14, 1992)

Altera Corporation, a California corporation (the "Company"), has
granted to _____________________________________________ (the "Optionee"), a
First Option (the "Option") to purchase a total of ________ shares of Common
Stock (the "Shares"), at the price determined as provided herein, and in all
respects subject to the terms, definitions and provisions of the 1988 Director
Stock Option Plan, as amended, (the "Plan") adopted by the Company, which is
incorporated herein by reference. Unless otherwise defined herein, the terms
defined in the Plan shall have the same defined meanings herein.

1. Nature of the Option. This Option is intended by the Company
and the Optionee to be a Nonstatutory Stock Option, and does not qualify for
any special tax benefits to the Optionee. This Option is not an Incentive
Stock Option.

2. Exercise Price. The exercise price is $_________ for each
share of Common Stock, which is 100% of the fair market value of the Common
Stock on the date of grant of this Option.

3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(a) Subject to subsections 3(i)(b), (c) and (d)
below, this Option shall be exercisable cumulatively, to the extent of 25% of
the Shares subject to this Option on the first anniversary of the date of grant
of this Option and as to 2.083% of the Shares subject to this Option for each
month which has expired after the first anniversary of the date of grant of
this Option.

(b) This Option may not be exercised for a
fraction of a share.

(c) In the event of Optionee's death, disability
or other termination of employment or consulting relationship, the
exercisability of the Option is governed by Sections 7, 8 and 9 below.

(d) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in Section
11 below.
<PAGE> 11

(ii) Method of Exercise. This Option shall be exercisable
by written notice which shall state the election to exercise the Option, the
number of Shares in respect of which the Option is being exercised, and such
other representations and agreements as to the holder's investment intent with
respect to such shares of Common Stock as may be required by the Company
pursuant to the provisions of the Plan. Such written notice shall be signed by
the Optionee and shall be delivered in person or by certified mail to the
Secretary of the Company. The written notice shall be accompanied by payment
of the exercise price. This Option shall be deemed exercised upon receipt by
the Company of such written notice accompanied by the exercise price.

4. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, concurrently with the exercise of all or any portion
of this Option, deliver to the Company his Investment Representation Statement
in the form acceptable to the Company.

5. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the Board:

(i) cash;

(ii) check; or

(iii) surrender of other shares of Common Stock of the
Company of a value equal to the exercise price of the Shares as to which the
Option is being exercised.

6. Restrictions on Exercise. This Option may not be exercised
until such time as the Plan has been approved by the shareholders of the
Company, or if the issuance of such Shares upon such exercise or the method of
payment of consideration for such shares would constitute a violation of any
applicable federal or state securities or other law or regulation, including
any rule under Part 207 of Title 12 of the Code of Federal Regulations
("Regulation G") as promulgated by the Federal Reserve Board. As a

-2-
<PAGE> 12
condition to the exercise of this Option, the Company may require Optionee to
make any representation and warranty to the Company as may be required by any
applicable law or regulation.

7. Termination of Status as a Director. In the event of the
termination of the Outside Director's Continuous Status as a Director, he may,
but only within thirty (30) days after the date of such termination (but in no
event later than the date of expiration of the term of this Option as set forth
in Section 11 below), exercise this Option to the extent that he was entitled
to exercise it at the date of such termination. To the extent that he was not
entitled to exercise this Option at the date of such termination, or if he does
not exercise this Option within the time specified herein, the Option shall
terminate.

8. Disability of Optionee. Notwithstanding the provisions of
Section 7 above, in the event of termination of Optionee's Continuous Status as
a Director as a result of his total and permanent disability (as defined in
Section 22(e)(3) of the Code), he may, but only within three (3) months from
the date of such termination (but in no event later than the date of expiration
of the term of this Option as set forth in Section 11 below), exercise his
Option to the extent he was entitled to exercise it at the date of such
termination. To the extent that he was not entitled to exercise the Option at
the date of termination, or if he does not exercise such Option (which he was
entitled to exercise) within the time specified herein, the Option shall
terminate.

9. Death of Optionee. In the event of the death of Optionee:

(i) during the term of this Option and while a Director
of the Company and having been in Continuous Status as a Director since the
date of grant of the Option, the Option may be exercised, at any time within
six (6) months following the date of death (but in no event later than the date
of expiration of the term of this Option as set forth in Section 11 below), by
Optionee's estate or by a person who acquired the right to exercise the Option
by bequest or inheritance, but only to the extent of the right to exercise that
would have accrued had Optionee continued living and remained in Continuous
Status as a Director six (6) months after the date of death; or

(ii) within thirty (30) days after the termination of
Optionee's Continuous Status as a Director, the Option may be exercised, at any
time within six (6) months following the date of death (but in no event later
than the date of expiration of the term of this Option as set forth in Section
11 below), by Optionee's estate or by a person who acquired the right to
exercise

-3-
<PAGE> 13
the Option by bequest or inheritance, but only to the extent of the right to
exercise that had accrued at the date of termination.

10. Non-Transferability of Option. This Option may not be
transferred in any manner other than by will or by the laws of descent or
distribution and may be exercised during the lifetime of Optionee only by him.
The terms of this Option shall be binding upon the executors, administrators,
heirs, successors and assigns of the Optionee.

11. Term of Option. This Option may not be exercised more than
ten (10) years from the date of grant of this Option, and may be exercised
during such term only in accordance with the Plan and the terms of this Option.

12. Taxation Upon Exercise of Option. Optionee understands that,
upon exercise of this Option, he will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the shares over the
exercise price. The Company may require the Optionee to make a cash payment to
cover any applicable withholding tax liability as a condition of exercise of
this Option. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the Option will be treated as capital gain or loss.

DATE OF GRANT: ________________

ALTERA CORPORATION
a California corporation

By: _______________________________

Title: ____________________________

OPTIONEE ACKNOWLEDGES AND AGREES THAT THE VESTING OF SHARES PURSUANT
TO SECTION 3 HEREOF IS EARNED ONLY BY CONTINUING SERVICE AS A DIRECTOR.
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS OPTION, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE VESTING SCHEDULE SET FORTH HEREIN DO NOT
CONSTITUTE AN EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A DIRECTOR
FOR THE VESTING PERIOD, FOR ANY PERIOD, OR AT ALL.

Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof.

-4-
<PAGE> 14
Optionee has reviewed the Plan and this Option in their entirety, has had an
opportunity to obtain the advice of counsel prior to executing this Option and
fully understands all provisions of the Option. Optionee hereby agrees to
accept as binding, conclusive and final all decisions or interpretations of the
Board upon any questions arising under the Plan.

Dated: _________________

________________________________
Optionee

-5-
<PAGE> 15

ALTERA CORPORATION

OUTSIDE DIRECTOR

NONSTATUTORY STOCK OPTION AGREEMENT
(Subsequent Option as amended January 14, 1992)

Altera Corporation, a California corporation (the "Company"), has
granted to _______________________________________________ (the "Optionee"), a
Subsequent Option (the "Option") to purchase a total of ________ shares of
Common Stock (the "Shares"), at the price determined as provided herein, and in
all respects subject to the terms, definitions and provisions of the 1988
Director Stock Option Plan, as amended, (the "Plan") adopted by the Company,
which is incorporated herein by reference. Unless otherwise defined herein,
the terms defined in the Plan shall have the same defined meanings herein.

1. Nature of the Option. This Option is intended by the Company
and the Optionee to be a Nonstatutory Stock Option, and does not qualify for
any special tax benefits to the Optionee. This Option is not an Incentive
Stock Option.

2. Exercise Price. The exercise price is $_________ for each
share of Common Stock, which is 100% of the fair market value of the Common
Stock on the date of grant of this Option.

3. Exercise of Option. This Option shall be exercisable during
its term in accordance with the provisions of Section 9 of the Plan as follows:

(i) Right to Exercise.

(a) Subject to subsections 3(i)(b), (c) and (d)
below, this Option shall be exercisable in installments cumulatively with
respect to 8.34% of the shares for each month beginning after the Optionee's
First Option is fully vested or, in the event that any previously granted
Subsequent Options are outstanding at the time this Option is granted,
following the complete vesting of any Subsequent Option previously granted.

(b) This Option may not be exercised for a
fraction of a share.

(c) In the event of Optionee's death, disability
or other termination of employment or consulting relationship, the
exercisability of the Option is governed by Sections 7, 8 and 9 below.
<PAGE> 16
(d) In no event may this Option be exercised
after the date of expiration of the term of this Option as set forth in Section
11 below.

4. Optionee's Representations. In the event the Shares
purchasable pursuant to the exercise of this Option have not been registered
under the Securities Act of 1933, as amended, at the time this Option is
exercised, Optionee shall, concurrently with the exercise of all or any portion
of this Option, deliver to the Company his Investment Representation Statement
in the form acceptable to the Company.

5. Method of Payment. Payment of the exercise price shall be by
any of the following, or a combination thereof, at the election of the Board:

(i) cash;

(ii) check; or

(iii) surrender of other shares of Common Stock of the
Company of a value equal to the exercise price of the Shares as to which the
Option is being exercised.

-2-

<PAGE> 17
Title 12 of the Code of Federal Regulations ("Regulation G") as promulgated by
the Federal Reserve Board. As a condition to the exercise of this Option, the
Company may require Optionee to make any representation and warranty to the
Company as may be required by any applicable law or regulation.

9. Death of Optionee. In the event of the death of Optionee:

-3-
<PAGE> 18
bequest or inheritance, but only to the extent of the right to exercise that
had accrued at the date of termination.

12. Taxation Upon Exercise of Option. Optionee understands that,
upon exercise of this Option, he will recognize income for tax purposes in an
amount equal to the excess of the then fair market value of the shares over the
exercise price. The Company may require the Optionee to make a cash payment to
cover any applicable withholding tax liability as a condition of exercise of
this Option. Upon a resale of such shares by the Optionee, any difference
between the sale price and the fair market value of the shares on the date of
exercise of the Option will be treated as capital gain or loss.

DATE OF GRANT: ________________

ALTERA CORPORATION
a California corporation

By: _______________________________

Title: ____________________________

-4-
<PAGE> 19
Optionee acknowledges receipt of a copy of the Plan and certain
information related thereto and represents that he is familiar with the terms
and provisions thereof, and hereby accepts this Option subject to all of the
terms and provisions thereof. Optionee has reviewed the Plan and this Option
in their entirety, has had an opportunity to obtain the advice of counsel prior
to executing this Option and fully understands all provisions of the Option.
Optionee hereby agrees to accept as binding, conclusive and final all decisions
or interpretations of the Board upon any questions arising under the Plan.

Dated: _________________

_______________________________
Optionee

-5-

<PAGE> 1

EXHIBIT 11.1

ALTERA CORPORATION

_____________

COMPUTATION OF EARNINGS PER SHARE (1)

<TABLE>
<CAPTION>
Years Ended December 31
-----------------------------------------------------------------
1990 1991 1992 1993 1994
---- ---- ---- ---- ----
(in thousands)
<S> <C> <C> <C> <C> <C>
Net Income $13,385 $17,807 $11,539 $21,195 $14,608
------- ------- ------- ------- -------

Weighted average shares outstanding:
Common 19,239 19,621 20,069 20,242 20,813
Stock options, under the treasury stock
method, which are considered to be
outstanding for all periods, when
dilutive, pursuant to SAB 64 753 946 574 754 810
------- ------- ------- ------- -------

Total common and common equivalent
shares outstanding 19,992 20,567 20,643 20,996 21,623
------- ------- ------- ------- -------

Net income per share $ 0.67 $ 0.87 $ 0.56 $ 1.01 $ 0.68
------- ------- ------- ------- -------

</TABLE>
____________

(1) This exhibit should be read in conjunction with Notes 2 and 8 of Notes
to Financial Statements.

<PAGE> 1
EXHIBIT 13.1

ABOUT YOUR INVESTMENT

STOCK OWNERSHIP PROFILE

At December 31, 1994, there were approximately 374 holders of record of Altera
stock. Since most holders' shares are listed under their brokerage firm's name,
the actual number of shareholders is much higher, and is estimated by the
Company to be over 10,000.

STOCK PRICE

Altera's initial public offering took place on March 31, 1988. The Company's
price-to-earnings ratio at each year-end for the last five years was as
follows:

*Excludes R&D in process write-off associated with the acquisition of Intel's
programmable logic business.

TRADING VOLUME

The average trading volume in the Company's stock increased 83% in 1994 over
1993, as measured by Nasdaq. Trading volume in 1994 averaged 767,000 shares
per day, compared to 420,000 per day in 1993, and 330,000 in 1992.

Page 12 Altera Corporation
<PAGE> 2
S E L E C T E D C O N S O L I D A T E D F I N A N C I A L D A T A

FIVE-YEAR SUMMARY
<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------------------------
(In thousands, except per share amounts) 1994 1993 1992 1991 1990
---------------------------------------------------- -------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Statements of Operations Data:
Sales $198,796 $140,279 $101,470 $106,862 $78,304
Cost of sales 77,672 58,470 43,994 43,846 32,515
---------------------------------------------------- -------- -------- -------- -------
Gross profit 121,124 81,809 57,476 63,016 45,789
Research and development 45,994 16,847 15,826 14,381 10,672
Selling, general, and administrative 45,771 35,202 25,147 22,423 16,381
---------------------------------------------------- -------- -------- -------- -------
Income from operations $ 29,359 $ 29,760 $ 16,503 $ 26,212 $18,736
======== ======== ======== ======== =======
Income before income taxes $ 31,496 $ 31,392 $ 18,024 $ 27,845 $20,717
======== ======== ======== ======== =======
Net income $ 14,608 $ 21,195 $ 11,539 $ 17,807 $13,385
======== ======== ======== ======== =======
Net income per share $ 0.68 $ 1.01 $ 0.56 $ 0.87 $ 0.67
======== ======== ======== ======== =======
Shares used in computing net
income per share 21,623 20,996 20,643 20,567 19,992
======== ======== ======== ======== =======
</TABLE>

<TABLE>
<CAPTION>
December 31
-----------------------------------------------------
1994 1993 1992 1991 1990
------------------------------------------------ --------- --------- -------- -------
<S> <C> <C> <C> <C> <C>
Balance Sheets Data:
Working capital $121,479 $ 94,895 $ 66,508 $ 51,414 $37,971
Total assets $213,882 $155,757 $114,693 $102,206 $74,947
Shareholders' equity $158,019 $121,699 $ 95,606 $ 81,450 $61,010
Book value per share $ 7.35 $ 5.96 $ 4.76 $ 4.11 $ 3.14
</TABLE>

QUARTERLY DATA (UNAUDITED)
<TABLE>
<CAPTION>
Year Ended December 31, 1994
----------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter
----------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $43,510 $47,061 $49,051 $59,174
Gross profit $26,531 $28,854 $30,180 $35,559
Net income $ 7,657 $ 8,292 $ 8,448 $(9,789)
======= ======= ======= =======
Net income per share $ 0.36 $ 0.39 $ 0.40 $ (0.44)
======= ======= ======= =======
</TABLE>

<TABLE>
<CAPTION>
Year Ended December 31, 1993
----------------------------------------
First Second Third Fourth
(In thousands, except per share amounts) Quarter Quarter Quarter Quarter
----------------------------------------------- ------- ------- ------- -------
<S> <C> <C> <C> <C>
Sales $29,059 $33,068 $37,071 $41,081
Gross profit $16,023 $19,175 $21,918 $24,693
Net income $ 3,139 $ 4,605 $ 6,269 $ 7,182
======= ======= ======= =======
Net income per share $ 0.15 $ 0.22 $ 0.30 $ 0.34
======= ======= ======= =======
</TABLE>

Altera Corporation Page 13
<PAGE> 3
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

SALES 1994 sales were $198.8 million, a 42% increase from 1993 sales of
$140.3 million, and a 96% increase from 1992 sales of $101.5 million. The
increase from 1993 was driven by increased volumes of the Company's newer MAX
7000 component family, and to a lesser extent by the FLEX 8000 family. Sales of
the mature Classic and MAX 5000 product lines have been flat for the last two
years, although unit volume has generally been increasing. Percentage sales
growth was generally consistent across all regions, with the exception of Europe
where sales growth in percentage terms was less than that for the other regions.

On October 1, 1994, the Company acquired Intel's Programmable Logic Device (PLD)
division. The acquired division consisted of two product families--the larger
(measured in sales volume) and more mature of the two families consists of
devices similar (and in some cases identical) in form and function to the
Company's Classic product line. The other family, introduced in 1992 and
marketed by Intel as the FLEXlogic family, consists of medium-density,
feature-rich components. Fourth quarter sales of the products acquired from
Intel totaled approximately $5 million.

Sales of development systems and software used by customers to design and
program Altera components were approximately 9% of sales in 1994, compared to
10% and 9% of sales in 1993 and 1992, respectively. Licensed installations grew
approximately 20% during the year and now total approximately 19,000.

Sales of the MAX 7000 family more than doubled from 1993, accounting for 75% of
the Company's growth in sales. The family comprised more than 35% of total
Company sales for the year. The MAX 7000 family, introduced in the first quarter
of 1992, offers users some of the fastest mid-density parts available in the
marketplace today. All members of the family are electrically erasable. Average
selling prices for the family declined significantly through the year,
commensurate with manufacturing cost reductions.

Sales of the FLEX 8000 family also doubled from prior year, although from a much
smaller base. The family accounts for less than 10% of Company sales. This
family was introduced in the fourth quarter of 1992 and includes some of the
largest programmable logic devices offered by any vendor. All members of the
family may be reprogrammed without being removed from the end-user's system
(in-circuit reconfigurability). Average selling prices for the family declined
more than 50% as a result of lower pricing generally, and as a result of a
product mix shift to lower-density products.

Altera believes that it is common for the prices of high-technology products to
decline as the technology matures, as availability and competition increase, and
as new, more advanced products are introduced. The Company expects this trend to
continue.

Page 14 Altera Corporation
<PAGE> 4
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

Altera's major markets continue to be in telecommunications, office automation,
and industrial applications. Altera's 1994 international sales were 48% of total
sales, compared to 49% in 1993 and 48% in 1992.

Major items in the statements of operations, expressed as a percentage of sales,
were as follows:

<TABLE>
<CAPTION>
Year Ended December 31
----------------------
1992 1993 1994
----------------------------------------------------------------
<S> <C> <C> <C>
Cost of sales 43% 42% 39%
Gross margin 57% 58% 61%
Research and development 16% 12% 23%
Selling, general, and administrative 25% 25% 23%
Operating income 16% 21% 15%
Other income, net 1% 1% 1%
Provision for income taxes 6% 7% 9%
Net income 11% 15% 7%
</TABLE>

GROSS MARGIN As a percentage of revenue, gross margin improved to 61%, the
highest level in more than five years. Margin percentage showed quarter-to-
quarter improvement in each of the first three quarters of the year, but
declined in the fourth quarter as a result of lower margins on the products
acquired from Intel. Relative to prior years, margin percentage improved as a
result of scale efficiencies on higher production volumes and improvements in
production yields. These improvements were partially negated by higher costs for
silicon wafers purchased from Sharp Corporation of Japan as a result of a weaker
dollar versus the yen.

RESEARCH & DEVELOPMENT The Company, through its research and development
efforts, attempts to bring new products to market and to improve and update its
existing products. In the last three years, the Company has brought to market
enhanced versions of the MAX 7000 family, the entire FLEX 8000 family, three new
major software releases, and several new package technologies, and has
introduced the MAX 9000 family. Additionally, the Company has redesigned a
number of its products to accommodate their manufacture on new wafer fabrication
processes, including a new eight inch wafer process using triple-layer metal
technology.

In the fourth quarter of 1994, the Company charged $23.7 million of the purchase
price of the Intel programmable logic business to "research and development in
process." Excluding this charge, research and development expenditures increased
by 32% from 1993 to 1994, and 6% from 1992 to 1993. The increase over the prior
year was driven by larger expenditures for the design of new products, including
more design engineering labor, prototype wafers, and masks. Also contributing to
the increase was higher labor expense for the development of software to support
new products and design environments.

Altera Corporation Page 15
<PAGE> 5
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

SELLING, GENERAL & ADMINISTRATIVE Selling, general, and administrative
expenses rose 30% in 1994 compared to a 40% increase from 1992 to 1993. Selling
expenses increased 36% over 1993, driven by higher marketing and field sales
headcount, new offices both domestically and internationally, increases in
advertising and promotional expenditures, and higher commissions due to
increased sales. Altera has eleven domestic and seven international field sales
offices and markets its products through distributors, representatives, and its
own direct sales force. Approximately 74% of the Company's worldwide sales are
made through distributors. The Company will continue to increase sales resources
in markets and regions where it anticipates such actions will increase sales or
improve customer service.

General and administrative expenses increased 19% in 1994 over 1993, and 74% in
1993 over 1992, primarily as a result of increased legal expenses. Legal
expenses in 1994 were up 8% over 1993 and included continued expenses associated
with the patent litigation with Xilinx, Inc., which commenced in June 1993, and
to a much lesser degree, patent litigation with AMD, which commenced in August
1994. The shareholder class action suit brought against the Company in 1992 was
settled in the third quarter of 1994 with minimal impact to 1994 results.
Excluding these litigation expenses, general and administrative expenses, which
include accounting, other legal, data processing, human resources management,
and corporate administration costs, were up 27% in 1994, primarily as a result
of increased headcount.

OPERATING INCOME Operating income in 1994 was $29.4 million, flat as
compared to 1993 and up from the $16.5 million reported in 1992. Excluding the
research and development in process charge, operating income was $53.1 million
or 27% of revenue compared to 21% of revenue in 1993. On this basis, the
improvement came from both improved gross margins (60.9% compared to 58.3%), and
lower operating expenses (34.2% compared to 37.1%). The lower operating expenses
stemmed from a lower percentage of selling, general, and administrative
expenses, partially offset by an increase in research and development.

INTEREST & OTHER INCOME Increased cash balances in 1994 combined with
improved interest rates increased interest income 55% versus 1993 to $2.9
million.

TAXES Altera's tax rate was 54% percent in 1994, compared to 33% in 1993 and
36% in 1992. The higher rate in 1994 relative to 1993 resulted from the
accounting treatment of the research and development in process charge. The tax
rate in 1993 includes a favorable adjustment for taxes related to prior tax
years. Excluding the effect of the research and development in process charge,
the effective rate was 37% in 1994.

Page 16 Altera Corporation
<PAGE> 6
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

FUTURE RESULTS Future operating results depend on the Company's ability to
develop, manufacture, and sell complicated semiconductor components and complex
software that offer customers greater value than solutions offered by competing
vendors. The Company's efforts in this regard may not be successful. Also, a
number of factors outside of the Company's control, including general economic
conditions and cycles in world markets, exchange rate fluctuations, or a lack of
growth in the Company's end markets could adversely impact future results. The
Company is highly dependent upon subcontractors to manufacture silicon wafers
and perform assembly and testing services. Disruptions or adverse supply
conditions arising from market conditions, political strife, labor disruptions,
natural or man-made disasters, other factors, normal process fluctuations, and
variances in manufacturing yields could have adverse consequences on the
Company's future results. Additionally, litigation relating to competitive
patents and intellectual property, competitive breakthroughs, and aggressive
competitive pricing could also adversely affect future operating results.

For instance, in 1994, the Company found it necessary to significantly reduce
the prices for its FLEX 8000 family of products in order to stimulate customer
interest and design activity. In 1992 and 1993, competition resulted in severe
price erosion on the MAX 5000 line of products resulting in lower margins. The
Company expects price competition and other competitive threats to continue.
Because of the foregoing and other factors that might affect the Company's
operating results, past financial performance should not be considered an
indicator of future performance, and investors should not use historical trends
to anticipate future results. In addition, the cyclical nature of the
semiconductor industry and other factors have resulted in a highly volatile
price of the Company's common stock.

FINANCIAL CONDITION

Total assets increased $58 million to a total of $214 million at year end. Cash,
cash equivalents, and short-term investments increased $11.0 million and
receivables increased $9.8 million; property, plant, and equipment increased
$4.5 million, while intangible assets and acquired technology increased $5.2
million. Cash paid for the acquisition of Intel Corporation's programmable logic
business was $22.9 million. The increased asset base was funded primarily
through operating income. Working capital of $121 million increased $26 million
over year-end 1993 working capital of $95 million.

CASH, CASH EQUIVALENTS & SHORT-TERM INVESTMENTS Altera's cash, cash
equivalents, and short-term investments (total cash) increased by $11.0 million
in 1994 to $92.6 million. $38.2 million in cash generated from operating
activity and $4.5 million in proceeds from stock sold to employees were
partially consumed by the Intel programmable logic business acquisition ($22.9
million) and capital expenditures ($10.5 million). At year-end 1994, total
cash represented 43% of total assets and 59% of total shareholders' equity.

Altera Corporation Page 17
<PAGE> 7
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

ACCOUNTS RECEIVABLE Accounts receivable increased 45% to $31.7 million. This
increase roughly parallels the 44% increase in fourth quarter 1994 sales versus
fourth quarter of 1993 sales.

INVENTORIES Year-end inventories of $38.5 million more than doubled from
year-end 1993 levels. Inventory levels have risen to support increasing customer
demand, provide improved customer delivery response, and also as a result of the
purchase of Intel's programmable logic business.

ACQUIRED TECHNOLOGY $7.0 million of the purchase price of the Intel
programmable logic business was classified as acquired technology and is being
amortized to cost of goods sold over a four-year period on a straight-line
basis.

CURRENT LIABILITIES Current liabilities increased by $22 million (64%) over
the prior year as a result of increases in accrued liabilities to vendors and
employees, and an increase in the accruals for returns and allowances stemming
from higher sales volumes and increased world-wide distributor inventories.

SHAREHOLDERS' EQUITY Shareholders' equity increased by $36.3 million in
1994. Retained earnings increased $14.6 million, and common stock increased
$21.7 million, primarily as a result of the stock issued to purchase Intel's
programmable logic business. In addition to $22.5 million in cash paid for the
division, the Company also paid Intel 701,350 shares valued at $14.9 million.

CAPITAL EXPENDITURES Capital expenditures for the year totaled $10.5
million, a $5.0 million increase over 1993 expenditures. A major portion of the
increase was for additional test and automated handling capacity to accommodate
increased sales of the Company's newer products, which have higher pin-counts,
larger densities, and faster speeds than the Company's more mature families.
Altera's capital expenditures in the past three years have been primarily for
semiconductor design and test equipment, as well as data processing software and
equipment.

Page 18 Altera Corporation
<PAGE> 8
MANAGEMENT'S DISCUSSION & ANALYSIS OF FINANCIAL CONDITIONS &
RESULTS OF OPERATIONS

EMPLOYEES Over the course of 1994, the number of regular employees increased
27% to 667 at year end. At year end, there were 207 employees in research and
development, 200 in manufacturing, 197 in sales and marketing, and 63 in finance
and administration. Sales per average employee count was $335,000 compared to
$279,000 in 1993, and $220,000 in 1992.

LIQUIDITY & CAPITAL RESOURCES

At December 31, 1994, Altera had $92.6 million of cash, cash equivalents, and
short-term investments available to finance future growth, and no long-term
debt. The Company also has a banking facility available for standby and
commercial letters of credit. Management believes that capital expenditures in
1995 will increase from 1994 commensurate with sales growth. In addition, the
Company may consider an expansion of its facilities, which may increase capital
expenditures beyond this level. Altera believes the available sources of funds
and the cash expected to be generated from operations will be adequate to
finance current operations and capital expenditures through 1995.

IMPACT OF CURRENCY & INFLATION

In 1994 and prior years, the Company purchased the majority of its materials and
services in U.S. dollars, and its foreign sales were also billed in U.S.
dollars. Thus, the Company has not been subject to substantial currency exchange
fluctuations in the past. However, certain contracts for silicon wafer purchases
are denominated in Japanese yen, and the volume of such contracts increased
significantly in 1994; further increases are anticipated in 1995. The increase
of yen-denominated purchases in 1994 and the declining value of the dollar with
respect to the yen had an adverse impact on the Company's margins. The Company
was able to mitigate much of that impact with improved yields and efficiencies.
However, there is no assurance that such improvements will occur in future
years, or that the value of the dollar with respect to the yen will not
deteriorate further. Moreover, market conditions may change such that Altera
might choose to bill foreign customers in local currencies. Accordingly, the
impacts of other foreign currency exchange rate fluctuations may be material in
the future. The effects of inflation upon Altera's financial results have not
been significant to date.

Altera Corporation Page 19
<PAGE> 9
CONSOLIDATED BALANCE SHEETS

<TABLE>
<CAPTION>
December 31
---------------------
(In thousands, except share amounts) 1994 1993
--------------------------------------------------------------------- --------
<S> <C>
ASSETS

Current assets:
Cash and cash equivalents $ 41,639 $ 16,832
Short-term investments 50,955 64,805
-------------------------------------------------------------------- --------
Total cash, cash equivalents, and short-term
investments 92,594 81,637
Accounts receivable, less allowance for doubtful
accounts of $727 and $471 31,662 21,858
Inventories 38,477 16,242
Deferred income taxes 12,365 7,798
Other current assets 2,244 1,418
-------------------------------------------------------------------- --------
Total current assets 177,342 128,953
Property and equipment, net 18,212 13,693
Investments 11,772 13,111
Acquired technology 6,556 -
-------------------------------------------------------------------- --------
$213,882 $155,757
======== ========

LIABILITIES & SHAREHOLDERS' EQUITY

Current liabilities:
Accounts payable $ 11,313 $ 5,312
Accrued liabilities 34,573 19,703
Accrued compensation 8,631 5,590
Income taxes payable 1,346 3,453
--------------------------------------------------------------------- --------
Total current liabilities 55,863 34,058
-------- --------
Commitments and contingencies (Note 6)
Shareholders' equity:
Common stock; no par value; 40,000,000 shares authorized;
21,487,814 and 20,408,087 shares issued and outstanding 73,146 51,434
Retained earnings 84,873 70,265
--------------------------------------------------------------------- --------
Total shareholders' equity 158,019 121,699
-------- --------
$213,882 $155,757
======== ========
</TABLE>

See accompanying notes to consolidated financial statements.

Page 20 Altera Corporation
<PAGE> 10
CONSOLIDATED STATEMENTS OF OPERATIONS & SHAREHOLDERS' EQUITY

<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
(In thousands, except per share amounts) 1994 1993 1992
------------------------------------------------------------ -------- --------
<S> <C> <C> <C>
OPERATIONS
Sales $198,796 $140,279 $101,470
Cost of sales 77,672 58,470 43,994
---------------------------------------------- -------- -------- --------
Gross profit 121,124 81,809 57,476

Research and development 22,249 16,847 15,826
Research and development in process 23,745 - -
Selling, general, and administrative 45,771 35,202 25,147
---------------------------------------------- -------- -------- --------
Income from operations 29,359 29,760 16,503

Interest and other income 2,137 1,632 1,521
---------------------------------------------- -------- -------- --------
Income before income taxes 31,496 31,392 18,024
Provision for income taxes 16,888 10,197 6,485
---------------------------------------------- -------- -------- --------
Net income $ 14,608 $ 21,195 $ 11,539
======== ======== ========
Net income per common share and common
equivalent $ 0.68 $ 1.01 $ 0.56
======== ======== ========
Shares and equivalents used in calculation of
net income per share 21,623 20,996 20,643
======== ======== ========
</TABLE>

<TABLE>
<CAPTION>
Common Retained
(In thousands, except share amounts) Stock Earnings
----------------------------------------------------------------------- --------
<S> <C> <C>
SHAREHOLDERS' EQUITY
Balance, December 31, 1991 $43,919 $37,531

Tax benefit resulting from stock option transactions 2,000
Issuance of 456,860 shares 2,292
Repurchase of 175,000 shares (1,675)
Net income 11,539
--------------------------------------------------------- ------- -------
Balance, December 31, 1992 46,536 49,070

Tax benefit resulting from stock option transactions 2,049
Issuance of 332,285 shares 2,849
Net income 21,195
--------------------------------------------------------- ------- -------
Balance, December 31, 1993 51,434 70,265

Tax benefit resulting from stock option transactions 2,265
Issuance of 1,079,727 shares 19,447
Net income 14,608
--------------------------------------------------------- ------- -------
Balance, December 31, 1994 $73,146 $84,873
======= =======
</TABLE>

See accompanying notes to consolidated financial statements.

Altera Corporation Page 21
<PAGE> 11
CONSOLIDATED STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
(In thousands) 1994 1993 1992
------------------------------------------------------------------ ------- -------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 14,608 $21,195 $11,539
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation 7,001 6,504 6,592
Amortization 2,527 1,310 759
Research and development in process 23,745 - -
Deferred taxes (4,568) (3,780) 5
Changes in assets and liabilities net of
effects from purchase of Intel programmable
logic business:
Accounts receivable, net (9,804) (7,377) 1,737
Inventories (12,235) (1,211) (4,135)
Other current assets (825) 69 (487)
Accounts payable 6,001 2,765 (501)
Accrued liabilities 10,799 9,342 2,300
Accrued compensation 3,041 2,559 (239)
Income taxes payable (2,107) 418 (145)
------------------------------------------------------------------ ------- -------
Cash provided by operating activities 38,183 31,794 17,425
-------- ------- -------

CASH FLOWS FROM INVESTING ACTIVITIES
Capital expenditures (10,509) (5,520) (6,029)
Acquisition of Intel programmable logic
business (22,911) - -
Other long-term investments (600) (112) (3,584)
Net change in short-term investments 13,850 (24,356) (25,540)
------------------------------------------------------------------ ------- -------
Cash used for investing activities (20,170) (29,988) (35,153)
-------- ------- -------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of capital stock - - (1,675)
Tax benefit from employee stock dispositions 2,265 2,049 2,000
Net proceeds from issuance of capital stock 4,529 2,849 2,292
------------------------------------------------------------------ ------- -------
Cash provided by financing activities 6,794 4,898 2,617
-------- ------- -------
Net increase (decrease) in cash and cash
equivalents 24,807 6,704 (15,111)
Cash and cash equivalents at beginning of year 16,832 10,128 25,239
------------------------------------------------------------------ ------- -------
Cash and cash equivalents at end of year $ 41,639 $ 16,832 $ 10,128
Cash paid during the year for: ======== ======== ========
Income taxes $ 21,106 $ 11,390 $ 3,987
</TABLE>

See accompanying notes to consolidated financial statements

Page 22 Altera Corporation
<PAGE> 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: COMPANY, FORMATION & BUSINESS

Altera Corporation (the Company) designs, develops, manufactures, and markets
CMOS programmable logic integrated circuits and associated engineering
development software and hardware. The Company was incorporated in California in
January 1984.

The Company's export sales were $95.5, $69.2, and $48.6 million for 1994, 1993,
and 1992, respectively. Sales to Europe were $42.6, $34.5, and $27.8 million and
to Japan were $37.6, $24.7, and $13.3 million in 1994, 1993, and 1992,
respectively. In 1994, the two largest distributors accounted for 15% and 14% of
sales, whereas in 1993, they each accounted for approximately 10% of sales. In
1992, one distributor accounted for more than 10% of sales.

NOTE 2: SIGNIFICANT ACCOUNTING POLICIES

BASIS OF PRESENTATION The consolidated financial statements include the
accounts of the Company and its wholly-owned subsidiaries: Altera Germany GmbH,
Altera France SARL, Altera Italia SARL, Altera U.K. Limited, Altera Japan K.K.,
and Altera Foreign Sales Corporation. The statements also include results from
the acquired Intel programmable logic business only for the period subsequent to
the acquisition.

CASH EQUIVALENTS AND SHORT-TERM INVESTMENTS Cash equivalents consist of
highly liquid investments with original maturities of three months or less.
Short-term investments are principally composed of government obligations and
money market investments with remaining maturities of three months to one year.

INVENTORIES Inventories are recorded on a first-in-first-out basis at the
lower of standard cost, which approximates actual cost, or market.

DEPRECIATION AND AMORTIZATION Depreciation and amortization are
computed using the straight-line method. Estimated useful lives of two to five
years are used for equipment and office furniture. Amortization of leasehold
improvements is computed using the shorter of the remaining facility lease term
or the estimated useful life of the improvements. Depreciation for tax purposes
is computed using accelerated methods.

REVENUE RECOGNITION The Company recognizes revenue for product sales upon
shipment. Product sales to distributors are made under agreements allowing a
limited right-of-return and price adjustments under certain circumstances.
Estimated returns and allowances are recorded at the time of shipment.

FOREIGN EXCHANGE CONTRACTS At present, the Company has no open forward
contracts for the purchase or sale of foreign currencies, but may choose to
enter into such contracts in the future should conditions appear favorable. The
Company maintains a yen-dominated bank account, which is accounted for as an
identifiable hedge against wafer purchases.

INCOME TAXES Effective January 1, 1993, the Company adopted Statement of
Financial Accounting Standard No. 109, "Accounting for Income Taxes" (FAS 109).
Under FAS 109, the liability method is used in accounting for income taxes, and
future events can be considered to support recognition of deferred tax assets.
Prior to the adoption of FAS 109, the Company used the liability method under
FAS 96. Generally, FAS 96 prohibited consideration of future events in
calculating deferred taxes.

EARNINGS PER SHARE Net income per share is computed using the weighted
average number of common and dilutive common equivalent shares attributable to
stock options outstanding during the period, using the treasury stock method.

Altera Corporation Page 23
<PAGE> 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3: BALANCE SHEET DETAILS

<TABLE>
<CAPTION>
December 31
---------------------
(In thousands) 1994 1993
------------------------------------------------------ --------
<S> <C> <C>
Inventories:
Purchased parts and raw materials $ 2,185 $ 1,343
Work in process 22,230 11,316
Finished goods 14,062 3,583
------------------------------------------------------ --------
$ 38,477 $ 16,242
======== ========
Property and equipment:
Equipment $ 43,284 $ 36,531
Office furniture and equipment 4,124 2,904
Leasehold improvements 2,852 1,800
------------------------------------------------------ --------
50,260 41,235
Accumulated depreciation and amortization (32,048) (27,542)
------------------------------------------------------ --------
$ 18,212 $ 13,693
======== ========
</TABLE>

Accrued liabilities include provisions for returns and allowances of $22.5
million and $12.6 million for December 31, 1994, and 1993, respectively.

NOTE 4: SIGNIFICANT TRANSACTION

On October 1, 1994, Altera purchased Intel Corporation's Programmable Logic
Device (PLD) product line, including certain directly associated capital
equipment, a credit towards the purchase of inventory, and certain intellectual
property. By separate agreements related to the acquisition, Intel Corporation
agreed to supply Altera with associated PLD wafers for up to three years and to
license Altera to make PLDs under certain Intel Corporation patents, and Altera
agreed to supply Intel Corporation for the same three-year period with finished
PLDs that Intel Corporation had previously manufactured for internal
consumption. The PLD product line was purchased for a price of $37.8 million,
consisting of $22.9 million in cash and 701,350 shares of the Company's common
stock (valued at $14.9 million). The stock received by Intel is not registered,
but Intel received certain registration rights that can be exercised beginning
October 1, 1995. The transaction was accounted for as a purchase, and
accordingly the purchase price has been allocated to the assets acquired and
liabilities assumed based upon their estimated fair market values at the date of
acquisition. The excess of the purchase price over the fair market value of the
net tangible assets acquired was allocated to research and development in
process ($23.7 million), and to acquired technology ($7.0 million) that is being
amortized over four years on a straight-line basis.

The following unaudited pro forma information reflects the results of operations
for the years ended December 31, 1994 and 1993 as if the acquisition of the
programmable logic business had occurred as of the beginning of 1993, and
includes certain adjustments, including amortization of acquired technology,
lost interest income, revaluation of the fixed assets acquired, and related
income tax effects. The pro forma information excludes the $23.7 million charged
to research and development in process. The pro forma results have been prepared
for comparative purposes only and do not purport to be indicative of what
operating results would have been if the acquisition had actually taken place at
the beginning of 1993, or of operating results that may occur in the future.

<TABLE>
<CAPTION>
Year Ended December 31
------------------------
(In thousands, except per share amounts) 1994 1993
------------------------------------------------------------------ --------
<S> <C> <C>
Sales $244,544 $175,421
Net income $ 29,694 $ 21,406
Net income per common share and common equivalent $ 1.33 $ 0.99
</TABLE>

NOTE 5: CREDIT FACILITIES

The Company has available a $15 million bank credit facility for letters of
credit only. The terms of this facility require immediate funding of any draws
against any letters of credit issued under the facility. The facility requires
the Company to comply with certain covenants regarding net worth and financial
ratios.

Page 24 Altera Corporation
<PAGE> 14
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 6: COMMITMENTS & CONTINGENCIES

The Company leases its facilities under non-cancelable lease agreements. The
major facility lease expires in July 1997; the Company then has the option to
extend the lease for an additional two and one-half year period, followed by
three five-year options. The lease requires the Company to pay property taxes,
insurance, maintenance, and repair costs. Future minimum lease payments under
all non-cancelable operating leases as of December 31, 1994, are $2,451,000,
$2,527,000, and $1,663,000, in 1995, 1996, and 1997, respectively, and none
therafter. Rental expense under all operating leases amounted to $2,567,000,
$2,100,000, and $2,051,000 in 1994, 1993, and 1992, respectively.

In June 1992, a class action lawsuit was filed against the Company and certain
of its current and former officers and directors, alleging violations of the
federal securities laws. A second complaint, containing similar allegations, was
filed in August 1992. The two complaints were subsequently consolidated into one
class action. This matter was settled out of court in July 1994.

In June 1993, a lawsuit was filed against the Company by Xilinx, Inc., alleging
infringement of certain of Xilinx's patents by the Altera FLEX 8000 products.
The complaint seeks unspecified compensatory damages and costs and attorneys'
fees, and an injunction prohibiting continuing infringement. Xilinx subsequently
filed a Motion for Preliminary Injunction to prohibit the manufacture and sale
of FLEX 8000 products. In February 1994, Xilinx expanded its infringement claims
to cover the Company's MAX 5000 and MAX 7000 products. The court ruled against
the Motion for Preliminary Injunction in April 1994. Limited discovery has taken
place in the case. The Company disputes the merits of Xilinx's allegations and
intends to defend this action vigorously.

In June 1993, a lawsuit was filed by the Company against Xilinx for infringement
of certain of the Company's patents by the Xilinx XC3000 and XC4000 product
families. The complaint seeks unspecified compensatory damages and costs and
attorneys' fees, and an injunction prohibiting continuing infringement. The
complaint was amended in July 1993 to add allegations of infringement of an
additional patent. In June 1994, Xilinx filed motions for Summary Judgment
seeking dismissal of most of Altera's suit against Xilinx; these motions were
denied in December 1994. Significant discovery has taken place, but the court
has not yet set a schedule for trial. The Company intends to pursue this action
vigorously.

Xilinx has moved to consolidate the two lawsuits, and in October 1994, the court
denied this motion. Due to the nature of the litigation with Xilinx and because
the lawsuits are still in pre-trial stage, management cannot estimate the total
expenses, the possible loss, if any, or the range of loss that may ultimately be
incurred in connection with the allegations. Management cannot ensure that
Xilinx will not succeed in obtaining an injunction against the manufacture and
sale of the MAX 5000, MAX 7000, or FLEX 8000 families of products, or succeed in
invalidating any of the Company's patents. However, based on the facts currently
known, management does not believe that these matters will have a material
adverse effect on the financial position of the Company.

In August 1994, a lawsuit was filed against the Company by Advanced Micro
Devices (AMD) alleging infringement of certain of AMD's patents by the MAX 7000
product family. The complaint seeks unspecified compensatory damages and costs
and attorneys fees, and an injunction prohibiting continuing infringement. In
September 1994 Altera filed a counterclaim against AMD alleging infringement of
certain patents held by the Company. Limited discovery has taken place. The
Company intends to defend against AMD's claim, and to pursue its counterclaim,
vigorously. Due to the nature of the litigation with AMD, and because the
lawsuit is at an early stage, management cannot estimate the total expenses, the
possible loss, if any, or the range of loss that may ultimately be incurred in
connection with the allegations. Management cannot ensure that AMD will not
succeed in obtaining an injunction against the manufacturer and sale of the MAX
7000 product family, or succeed in invalidating any of the Company's patents.
However, based on the facts currently known, management does not believe that
this matter will have a material adverse effect on the financial position of the
Company.

Altera Corporation Page 25
<PAGE> 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7: INVESTMENTS

Altera Corporation's long-term investments primarily represent the Company's 17%
equity interest in Cypress Semiconductor (Texas) Inc. (CSTI), a subsidiary of
Cypress Semiconductor Corporation. Altera has the right to purchase a percentage
of the wafers produced by CSTI approximately equal to the Company's percentage
ownership of CSTI. The Company accounts for this investment under the cost
method.

NOTE 8: CAPITAL STOCK

STOCK OPTION AND PURCHASE PLANS 3.4 million shares of common stock
are reserved for issuance under the 1987 Stock Option Plan. The Company
commenced option grants under the 1987 Stock Option Plan in February 1988.

The Company's 1988 Director Stock Option Plan was approved by the shareholders
in April 1989. A total of 150,000 shares of common stock are reserved for
issuance thereunder. The plan provides for the periodic issuance of stock
options to members of the Company's Board of Directors who are not also
employees of the Company.

600,000 shares of common stock are reserved for issuance under the 1987 Employee
Stock Purchase Plan. The Plan permits eligible employees to purchase common
stock through payroll deductions not to exceed 10% of an employee's
compensation, at 85% of the lower of the closing price at the beginning or at
the end of each six-month offering period.

The Company received a $2,265,000, $2,049,000, and $2,000,000 tax benefit in
1994, 1993, and 1992, respectively, on the exercise of non-qualified stock
options and on the disposition of stock acquired with an incentive stock option
or through the employee purchase plan. The number of shares for which options
were exercisable was approximately 466,000 and 547,000 at December 31, 1994 and
1993, respectively. Subsequent to December 31, 1994, the Company's Board of
Directors authorized increases in the share reserves for the 1987 Stock Option
Plan, the 1988 Director Stock Option Plan, and the 1987 Employee Stock Purchase
Plan of 650,000, 50,000, and 100,000 shares, respectively, subject to
shareholder approval at the Company's next annual meeting. A summary of
transactions relating to the Company's stock plans follows:

<TABLE>
<CAPTION>
Shares
Subject to
Shares Outstanding Per Share
Reserved Options Price
------------------------------------------------ ----------- --------------
<S> <C> <C> <C>
BALANCE AT DECEMBER 31, 1991 918,749 1,661,581 $ 0.10 - 26.75
Shares purchased (89,922) $ 9.67 - 17.64
Stock options: Granted (910,467) 910,467 $ 8.38 - 33.25
Exercised (366,938) $ 0.10 - 17.63
Canceled 502,748 (502,748) $ 4.63 - 33.25
------------------------------------------------ --------- --------------
BALANCE AT DECEMBER 31, 1992 421,108 1,702,362 $ 0.10 - 33.25
Shares authorized 1,400,000
Shares purchased (117,995) $ 9.67 - 14.34
Stock options: Granted (697,467) 697,467 $14.13 - 32.25
Exercised (214,290) $ 0.10 - 11.38
Canceled 82,692 (82,692) $ 5.50 - 19.38
------------------------------------------------ --------- --------------
BALANCE AT DECEMBER 31, 1993 1,088,338 2,102,847 $ 0.10 - 32.25
Shares purchased (76,589) $22.79 - 23.91
Stock options: Granted (640,166) 640,166 $24.13 - 41.00
Exercised (301,950) $ 5.50 - 38.75
Canceled 159,163 (159,163) $ 9.13 - 35.00
------------------------------------------------ --------- --------------
BALANCE AT DECEMBER 31, 1994 530,746 2,281,900 $ 0.10 - 41.00
========= =========
</TABLE>

Page 26 Altera Corporation
<PAGE> 16
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9: MARKETABLE SECURITIES

The portfolio of marketable securities is carried at market as of the balance
sheet date, and consists primarily of fixed maturity securities. The carrying
value of fixed maturities at December 31, 1994 consists of municipal bonds
($70.1 million), municipal preferred stock ($0.9 million), and money market
investments ($15.0 million). Effective January 1, 1994, the Company adopted
Statement of Financial Accounting Standard No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (FAS 115), and accordingly, the
Company has categorized its marketable securities as available-for-sale.
Realized gains or losses are determined on the specific identification method
and are reflected in income. Net unrealized gains or losses are recorded
directly in shareholders' equity except that those unrealized losses that are
deemed to be other than temporary are reflected in income. At December 31, 1994,
the net unrealized holding losses on securities are immaterial, the contractual
maturities for all fixed maturity securities are one year or less, and
securities classified as cash equivalents equal $35.0 million.

NOTE 10: INCOME TAXES

The components of the provision for income taxes were as follows:

<TABLE>
<CAPTION>
Year Ended December 31
------------------------------
(In thousands) 1994 1993 1992
------------------------------------------------------ ------- ------
<S> <C> <C> <C>
Current tax expense:
United States $17,687 $11,302 $4,944
State 3,568 2,406 1,435
Foreign 200 146 101
------------------------------------------------------ ------- ------
Total current tax expense 21,455 13,854 6,480
Deferred taxes (4,567) (3,657) 5
------------------------------------------------------ ------- ------
Total provision for income taxes $16,888 $10,197 $6,485
======= ======= ======
</TABLE>

The 1994 tax provision includes taxes related to the acquisition of Intel's
programmable logic business. The 1993 tax provision includes a reduction of
previously provided taxes due to the change in tax rate that resulted from the
1993 Omnibus Budget Reconciliation Act and the settlement of various tax
matters.

Deferred tax assets (liabilities) under Financial Accounting Standard No. 109
(FAS 109) were as follows:

<TABLE>
<CAPTION>
December 31
------------------
(In thousands) 1994 1993
---------------------------------------------------- ------
<S> <C> <C>
Assets:
Inventory reserves $ 2,149 $1,621
Pricing reserves 2,953 2,301
Other reserves and accruals 5,509 3,828
Acquisition costs 7,300 -
Other 492 705
---------------------------------------------------- ------
Gross deferred tax assets 18,403 8,455
Deferred tax liabilities (805) (657)
Deferred tax asset valuation allowance (5,233) -
---------------------------------------------------- ------
Net deferred tax assets $12,365 $7,798
======= ======
</TABLE>

A valuation allowance of $5.2 million was created in 1994, attributable to
deferred tax assets from the acquisition of Intel's programmable logic business.
Sufficient uncertainty exists regarding the realizability of these assets and,
accordingly, a valuation allowance is required.

Altera Corporation Page 27
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The provision for taxes reconciles to statutory taxes as follows:

<TABLE>
<CAPTION>
Year Ended December 31
---------------------------------
(In thousands) 1994 1993 1992
--------------------------------------------------- ------- ------
<S> <C> <C> <C>
Tax provision at U.S. statutory rates $11,024 $10,987 $6,128
State taxes, net of federal benefit 2,319 1,564 947
Foreign sales corporation (995) (1,026) (330)
Valuation allowance 5,233 - -
Other, net (693) (1,328) (260)
--------------------------------------------------- ------- ------
Total provision for income taxes $16,888 $10,197 $6,485
======= ======= ======
</TABLE>

REPORT OF INDEPENDENT ACCOUNTANTS

To the Shareholders and Board of Directors of Altera Corporation:

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, shareholders' equity, and cash flows
present fairly, in all material respects, the financial position of Altera
Corporation and its subsidiaries at December 31, 1994 and 1993, and the results
of their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted accounting
principles. These financial statements are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant estimates
made by management, and evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for the opinion expressed
above.

PRICE WATERHOUSE LLP
San Jose, California
January 18, 1995

Page 28 Altera Corporation
<PAGE> 18
CORPORATE DIRECTORY

Board of Directors
Rodney Smith
Chairman, Chief Executive Officer & President
Altera Corporation

Michael A. Ellison
Venture Capitalist

Paul Newhagen
Vice President, Administration
Altera Corporation

Robert W. Reed
Senior Vice President
Intel Corporation

William E. Terry
Former Director & Executive Vice President
Hewlett-Packard Company

CORPORATE OFFICERS
Rodney Smith
President & Chief Executive Officer

Denis Berlan
Vice President, Operations/Product Engineering

Erik Cleage
Vice President, Marketing

Clive McCarthy
Vice President, Development Engineering

Paul Newhagen
Vice President, Administration

Thomas J. Nicoletti
Vice President, Finance & Chief Financial Officer

James Sansbury
Vice President, Technology

Sandra Scarsella
Vice President, Human Resources

Peter Smyth
Vice President, Sales

REGISTRAR/TRANSFER AGENT
Bank of Boston
Investor Relations
P.O. Box 644
Boston, MA 02102-0644
(617) 575-3100

CORPORATE HEADQUARTERS
2610 Orchard Parkway
San Jose, California 95134-2020
(408) 894-7000

CORPORATE COUNSEL
Wilson, Sonsini, Goodrich & Rosati
Palo Alto, California

INDEPENDENT ACCOUNTANTS
Price Waterhouse LLP
San Jose, California

FORM 10-K
A copy of the Company's Form 10-K, filed with the Securities and Exchange
Commission (without exhibits) is available from:

SHAREHOLDER RELATIONS
Altera Corporation
2610 Orchard Parkway
San Jose, California 95134-2020
(408) 894-7000

STOCK LISTING
Altera's common stock has been traded on the over-the-counter market since the
Company's initial public offering (IPO) on March 31, 1988, and is quoted on The
Nasdaq National Market under the symbol "ALTR." The Company has never paid cash
dividends on its common stock and has no present plans to do so.

For the past two years, the quarterly high and low sales prices for the common
stock were:

<TABLE>
<CAPTION>
1994 1993
Quarter High Low High Low
--------------------------------------------------------------
<S> <C> <C> <C> <C>
First 37-3/8 27-1/4 18-7/8 12 1/4
Second 38-7/8 25-1/8 20-1/8 14 1/2
Third 32 22-3/4 33-7/8 18 3/8
Fourth 42-3/4 26-13/16 35-1/8 23 1/4
</TABLE>

Altera, MAX, FLEX, and MAX+PLUS are registered trademarks, and MAX+PLUS II,
Classic, MAX 5000, MAX 7000, MAX 9000, FLEX 8000, FLASHlogic, FLEXlogic,
FastTrack, and individual device designations are trademarks of Altera
Corporation. Altera Corporation acknowledges the trademarks of other
organizations for their respective products or services mentioned in this
document.

<PAGE> 1

EXHIBIT 21.1

SUBSIDIARIES OF THE REGISTRANT

<TABLE>
<CAPTION>
Jurisdiction Year
Name of Incorporation Organized
---- ---------------- ---------
<S> <C> <C>
Altera GmbH Germany 1989

Altera Foreign Sales Corporation Barbados 1989

Nihon Altera KK Japan 1990

Altera France SARL France 1990

Altera Italia SARL Italy 1991

Altera (UK) Limited United Kingdom 1992

Altera Corporation (m) Sdn. Bhd. Malaysia 1995
</TABLE>

<ARTICLE> 5
<MULTIPLIER> 1,000

<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<CASH> 41,639
<SECURITIES> 50,955
<RECEIVABLES> 31,662
<ALLOWANCES> 727
<INVENTORY> 38,477
<CURRENT-ASSETS> 177,342
<PP&E> 50,260
<DEPRECIATION> 32,048
<TOTAL-ASSETS> 213,882
<CURRENT-LIABILITIES> 55,863
<BONDS> 0
<COMMON> 73,146
0
0
<OTHER-SE> 84,873
<TOTAL-LIABILITY-AND-EQUITY> 213,882
<SALES> 198,796
<TOTAL-REVENUES> 198,796
<CGS> 77,672
<TOTAL-COSTS> 77,672
<OTHER-EXPENSES> 91,765
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (2,137)
<INCOME-PRETAX> 31,496
<INCOME-TAX> 16,888
<INCOME-CONTINUING> 14,608
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 14,608
<EPS-PRIMARY> 0.68
<EPS-DILUTED> 0

</TABLE>